Tuesday, May 21, 2019

Winter is coming: Illinois, New Jersey, least prepared for next recession

Chicago's South Side
Profligate spending cannot go on forever. Economically speaking, winter is coming. We just don't know when.

Winter will be cruel to two blue states.

From Reuters:
Illinois and New Jersey are the two U.S. states least equipped to cope with an eventual downturn in the U.S. economy due to their inadequate reserves and pension funding pressures, Moody’s Investors Service said on Monday.

A report by the credit rating agency said Illinois and New Jersey lag the rest of the nation where 22 states are strongly prepared to weather a moderate recession without significant harm to their credit, while 26 states are moderately prepared.

“While most states have healthy reserves and inherently strong fiscal flexibility, Illinois and New Jersey both have low levels of reserves relative to the potential revenue decline in our recession scenario,” Emily Raimes, a Moody’s analyst, said in a statement. “In addition, they both show weakness in their pension risk scores.”

At Baa3, Illinois is the lowest-rated state as a result of its huge unfunded pension liability and chronic structural budget deficits. New Jersey, rated A3, also faces funding pressures after significant historic pension underfunding.

1 comment:

wolfy said...

Not surprised.