New Moody's Rules Make Hawaii The Worst State In The Nation

Moody’s new method for calculating state debt could put a damper on Hawaii’s aloha spirit.

The credit ratings agency announced Thursday that it will start factoring states’ unfunded pension liabilities into its ratings calculations. The new method — which states vehemently resisted — is designed to give a more integrated picture of a states’ debt obligations.

Hawaii has the most to lose from the new ratings system. Although the state’s debt — $5.2 billion — is relatively small, compared to large cash-strapped states like California and New York. But when combined with unfunded pensions, Hawaii’s total obligations equal 16 per cent of state GDP, the largest indebtedness of any state.

Until now, Hawaii has benefited from “excellent” credit ratings and ratings agencies have routinely praised the “money management policies of state and local governments,” according to Hawaii News Now

The good news from Thursday’s report is that state debt obligations are still relatively small compared to GDP. All the clamor about California going the way of Greece seems slightly overblown, at least for now.

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