State Finances to Experience a 'Profound Shift'

Some states might soon be facing a come to Jesus moment. That was the sobering message this week from a senior analyst at S&P Global Ratings, who warned that a “profound shift” is occurring in state finances pressured by pension debt, slow revenue growth and demographic changes.

Gabe Petek noted Illinois, Kentucky and New Jersey are particularly vulnerable as they have persistently struggled to balance budgets during one of the longest economic expansion periods in modern U.S. history. But they’re not the only ones who should be put on notice. "This long period of relative calm may have lulled some people into complacency when it comes to state finances," he wrote in an editorial for The Hill. "It shouldn’t have."

In addition to slower revenue growth, declining worker-to-beneficiary ratios in state retirement systems and rising Medicaid enrollments "have meant that fiscal stress is no longer confined to recessionary times," he wrote.