'Despite the impediments presented by the recession and historically slow recovery, significant reforms have been undertaken. We expect this trend to continue post-recession. OPEBs are generally more flexible than pensions and their legal protection appears to be more limited, which helps to foster change,' said
'GASB is expected to revise their OPEB standards in line with revised pension reporting requirements, which could provide greater consistency in available information. The changes could also increase focus on the issue and prompt more OPEB reform.'
States with above-average OPEB liabilities often have above-average liabilities for debt and pensions as well, which is not unexpected, since the same institutional infrastructure is making decisions regarding all three. Comparatively high OPEB liabilities are also seen in states that play an above-average role in relation to local government, like
Fitch believes that OPEB obligations are manageable for states. The median reported state OPEB liability is 1.8% of personal income, with a range of 0%-13.8%. However, healthcare has been among the biggest drivers of state spending over time.
Fitch notes that if states pay only the annual OPEB costs they could be saddled with ballooning payments as a result of rising retirements and medical costs over time. This concern can be offset by a demonstrated ability and willingness to make changes as needed.
For more information, a special report titled 'U.S. State OPEB Liabilities' is available on the Fitch Ratings web site at www.fitchratings.com or by clicking on the link.
Additional information is available at 'www.fitchratings.com'.
Source: Fitch Ratings
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