Sunday, June 12, 2016

After Puerto Rico's collapse, is your city or state next?

After Puerto Rico's collapse, is your city or state next? - Watchdog.org:
"Which state or city is most likely to follow Puerto Rico’s example, and beg Congress for a legal mechanism to get out of its crushing bond and pension debts?
A detailed new study from the Mercatus Center at George Mason University gets us part of the way to an answer.
Puerto Rico’s finances are uniquely terrible, according to this study of state finances, ranking dead last in five major measurements of long- and short-term solvency.
But the worst-run states are much closer to Puerto Rico’s condition than they are to states with balanced budgets and reasonable debt.
With short-term budget troubles and colossal long-term debt, Kentucky, Illinois, New Jersey, Massachusetts, and Connecticut, in particular, are much closer to the basket case economic condition of the Caribbean territory on the Mercatus fiscal health index than they are to states such as Texas, the Dakotas, Florida, or Nebraska, where budgets are balanced and public pension systems may yet be salvaged.
For example, Connecticut, which ranks 50th out of the states for fiscal health, has run up $67 billion in debt, compared to Puerto Rico’s $118 billion, while both have populations of around 3.6 million. But personal income in Puerto Rico is less than one-third of Connecticut’s.
If that seems reassuring, consider that the Nutmeg State’s debt figure grows to $124 billion if you recalculate pension debt, assuming it will all be paid — an assumption one no longer makes for Puerto Rico, which gave up on funding its pension system a decade ago and is now just draining the balance..."

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