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In The Danger Zone

A Comparative Analysis of New York State's Long-Term Obligations

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March 08, 2010

A comparative analysis of the 50 states indicates that New York's debt burden is in a "danger zone;" it is well above national averages and greater than that of all but three states. As a result New Yorkers are currently paying about $5.6 billion in debt service, and in four years the state's credit card obligation will be over $7.1 billion or one of every ten dollars paid in taxes.

The comparative analysis builds upon a methodology initially developed by the Citizens Budget Commission in 2000 and updated in 2005. The current analysis improves on the approach by incorporating data about unfunded liabilities for health insurance benefits to retirees; the unfunded liabilities for pension benefits were included in previous analyses, but the information about post-employment benefits other than pension were not available at the time of the earlier analyses. These long-term obligations are included along with long-term bonds in measuring a state's debt.

The approach consists of six steps:

1. Identify the relevant bonded debt outstanding for each state.

2. Add unfunded pension obligations and unfunded obligations for other post-employment benefits (OPEB) to the state's bonded debt.

3. Determine the resources (revenue base) available to draw upon in repaying the total debts.

4. Adjust available resources to reflect the division of responsibility between a state and its local governments. 

5. Adjust available resources to take into account the likely impact of a future national economic downturn; a recession should not jeopardize debt repayment, and states likely to suffer disproportionately from nation trends should include a safety margin.

6. Compute the ratio of total relevant debt to the adjusted resource base for each state; a state with a ratio far above the average for all states can be judged as having too much debt.

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In The Danger Zone