NEW YORK (Standard & Poor’s) Nov. 17, 2014–Total unfunded state other
postemployment benefit (OPEB) liabilities are stable from last year, although
funding ratios remain low for the nation’s combined $529.8 billion in
liabilities, said a report published today by Standard & Poor’s Ratings
Services.
The report entitled,”Diverging Trends Underlie Overall Stable U.S. State OPEB
Liability,” highlights states that have done the most to reduce absolute OPEB
liabilities, led by North Carolina, Michigan, and Hawaii, as well as those for
which liabilities have actually increased, including Texas, New Jersey, and
Alaska. The report also notes that proposed changes to the Governmental
Accounting Standards Board (GASB) to make future OPEB reporting align with new
standards for pension reporting could improve the ability to compare OPEB
liability across states.
A companion to this OPEB report, “Proposed GASB Changes To OPEB Reporting
Could Enhance Comparability But Reduce Information On Funding Progress,” also
published today, outlines proposed GASB changes and the effect they could have
on how states report OPEB liabilities. If implemented, the new rules could
improve OPEB comparability but obscure information on a state.
Standard & Poor’s annual survey of U.S. states OPEB liabilities shows only a
0.1% decline from last year’s report, showing some states’ practical measures
to address rising health care costs and the largely unfunded status of OPEB
trusts, taking into account divergence among states.
“We believe states’ efforts to address OPEB liabilities have slowed the growth
in total unfunded liabilities in the past several years,” said Standard &
Poor’s credit analyst Sussan Corson.
“Funding ratios have also improved slightly for most states that have
established OPEB trusts, and changes to certain states’ OPEB plan design or
eligibility requirements have also led to declines,” Ms. Corson continued.
“Conversely, some states continue to report rising OPEB liabilities that could
eventually pressure budgets and credit unless addressed,” Ms. Corson
concluded.
Despite the overall stability of state OPEB funding, several states have
reported large changes in their actuarial unfunded liability since our last
survey. The largest absolute decline in unfunded OPEB liabilities based on
updated OPEB valuations in the past year occurred in Michigan, North Carolina,
and Hawaii.
The OPEB report also notes the effect of the Patient Protection And Affordable
Care Act on long-term health care costs that will continue to affect states
and could provide both opportunities and costs.
Under Standard & Poor’s policies, only a Rating Committee can determine a
Credit Rating Action (including a Credit Rating change, affirmation or
withdrawal, Rating Outlook change, or CreditWatch action). This commentary and
its subject matter have not been the subject of Rating Committee action and
should not be interpreted as a change to, or affirmation of, a Credit Rating
or Rating Outlook.
The report is available to subscribers of RatingsDirect at
www.globalcreditportal.com and at www.spcapitaliq.com. If you are not a
RatingsDirect subscriber, you may purchase a copy of the report by calling (1)
212-438-7280 or sending an e-mail to [email protected].
Ratings information can also be found on Standard & Poor’s public Web site by
using the Ratings search box located in the left column at
www.standardandpoors.com. Members of the media may request a copy of this
report by contacting the media representative provided.
Publication date: 17-Nov-2014 11:02:48 EST
Primary Credit Analyst: Sussan S Corson, New York (1) 212-438-2014;
[email protected]
Media Contact: Alex Ortolani, New York 212-438-5054;
[email protected]
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