US - Pension obligations will continue to weigh on states' credit ratings, Moody's Investors Service said in a report.
"Given the level of fiscal stress being felt by most states and the prospects for sluggish economic growth and slow revenue recovery, pension funding pressures will continue to have a negative impact on state credit quality and state ratings. Moody's also recognises that, as currently reported, pension liabilities may be understated," Moody's said.
Moody's has begun looking at combined debt and pension figures to get a clearer view of state obligations. The firm found the states with the highest debt and pension funding needs were Connecticut, Hawaii, Massachusetts and Illinois.
"Pensions have always had an important place in our analysis of states, but we looked separately at tax-supported bonds and pension funds in our published financial ratios," said Moody's analyst Ted Hampton. "Presenting combined debt and pension figures offer a more integrated, and timely, view of states' total obligations."
In September, the ratings agency revised its outlook from stable to negative for both Illinois and New Jersey in part because of their pension liabilities. (Global Pensions; 24 September 2010)
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