A group called Truth in Accounting looked at the state's financial reports and did not like what it saw. Here is what it concluded in its "Financial State of Arkansas."
- Arkansas has $6.6 billion available in assets to pay $9.5 billion worth of bills.
- The outcome: A $2.9 billion shortfall and a $3,600 Taxpayer Burden.
- Despite reporting all of its pension debt, the state continues to hide $877.1 million of its retiree health care debt.
- Arkansas' reported net position is inflated by $1.5 billion, largely because it has delayed recognizing changes to its net pension liability.
Unfunded pension and post-retirement benefits liabilities are very concerning because either one of two things will happen: spending must increase to deal with them or the promised benefits are scaled back. With the first option, the longer that legislators wait to fund these liabilities, the more expensive they get. With the second option, there are various legal concerns that, even if overcome, will lead to a disgruntled workforce that rightly dislikes having retirement promises broken.
Lawmakers need to deal with these unfunded liability issues sooner rather than later. Other states have enacted reforms that Arkansas should consider. But beyond reform, it is also necessary to start funding the already-promised post-retirement benefits. Waiting to deal with this problem will only make it worse.
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Marc Kilmer writes for The Arkansas Project.
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