While the national debt continues to pile up, state governments have their own problems. According to a report by State Budget Solutions (SBS), combined state government debt is $5.1 trillion. This equals about $16,178 per person, and compared with all state fiscal year spending, amounts to more than four times as much debt as expenditures.
While the state of Mississippi is not one of the highest debtors in simple dollars, the state ranks among the top five who have the highest proportion of debt to gross state product: Mississippi apparently owes the equivalent of 54 percent of the state’s gross product.
Where does most of this indebtedness come from? Pensions.
According to SBS, Mississippi’s total debt is $54,686,815, and $48,808,343 of that is market valued unfunded public pension liability. This is the amount of pensions that have been promised for future payment but for which the state does not yet have the money.
SBS finds public pensions to be a leading factor of state debt across the nation, accounting for over 75 percent of total combined state debt.
What will be the impact on state finances? According to SBS,
“Over time, state debt will exact a toll on state budgets. Money once expected to fund vital services like education and healthcare will have to be redirected to debt service, increased contributions to public pension systems, and more.”
Is this an acceptable risk to lay on future generations—or maybe even our own?
>>Source: Eucalitto, Cory. “State Budget Solutions’ Fourth Annual State Debt Report.” State Budget Solutions. 8 Jan. 2014.