Combined, the total debt of the 50 state governments in the U.S. was $1.5 trillion in fiscal year 2018, according to Truth In Accounting’s (TIA) <2019 Financial State of the States report.
It is the tenth in a decade of reports analyzing states’ budgeting, reporting, and fiscal health using the same methodology.
The good news is that due to a prosperous economy, total debt among the 50 states decreased by $62.6 billion in fiscal year 2018, excluding debt related to capital assets.
Despite this, the average taxpayer burden across all 50 states to cover the debt was $8,400, and 40 state governments were unable to pay their bills.
Nine state governments accumulated debt to the point where the taxpayer burden exceeds $20,000, according to the analysis.
TIA calculates the taxpayer burden according to the amount of money each taxpayer would have to pay for the state to pay all of its existing debt. A taxpayer surplus is the amount of money left over after all of a state’s bills are paid, divided by the estimated number of taxpayers in the state.
TIA labels states that can’t pay their bills as Sinkhole States and those who can as Sunshine States.
Top Sunshine States, with the lowest taxpayer burden, are Alaska, North Dakota, Wyoming, Utah and Idaho.
Sinkhole States are New Jersey, Illinois, Connecticut, Massachusetts and Hawaii.
In order to balance the budget, required by law in 49 states, “elected officials have not included the true costs of the government in their budget calculations and have pushed costs onto future taxpayers,” the report states. Unfunded retirement and healthcare obligations represent real expenses that fall on taxpayers, causing the greatest amount of debt, the report adds.
TIA implemented a grading system for the states to better explain their actual financial situation. Three states received A’s, seven received B’s, 13 received C’s, 18 received D’s, and nine states received failing grades.
The worst states with the highest taxpayer burden and worst fiscal health all earned F grades. They include New Jersey, with the highest taxpayer burden of $65,100, followed by Illinois with a $52,600 taxpayer burden, Connecticut with $51,800, Massachusetts and Hawaii both carrying a $31,200 taxpayer burden, Delaware with $27,100, Kentucky with $25,700, California with $21,800, and New York with $20,500.
“This crisis has been years in the making and demands political courage on the part of voters and elected officials to return to the path of sustainability,” Sheila Weinberg, founder and CEO of TIA, said.
One of the ways states appear to balance their budgets is that officials “shortchange” public pension and OPEB funds, resulting in a $824 billion shortfall in pension funds and a $664.6 billion shortfall in OPEB funds, TIA said.
“Many but not all states are in bad shape. States like Utah, Tennessee, Nebraska and, among the larger states, North Carolina – they have good lessons to offer other states,” Bill Bergman, TIA director of research, told The Center Square.
“For the states in bad shape, state legislatures, governors, judges and government employees probably shouldn’t rely on federal government assistance, even if things like the government’s response to the financial crisis of 2008-2009 or growing calls for federal assistance for the Pension Benefit Guaranty Corporation suggest they should,” Bergman adds.
“Our federal government is arguably in worse financial condition than even the worst states (New Jersey, Illinois, and Connecticut), despite, or perhaps because of, the fact that the federal government thinks it can print money.”
Founded in 2002, Truth in Accounting is dedicated to educating and empowering citizens with understandable, reliable, and transparent government financial information. This year’s report is the tenth in a decade of TIA analyzing states’ budgeting, reporting, and fiscal health using the same methodology.
“Providing accurate and timely information to citizens and the media is an essential part of government responsibility and accountability,” TIA states. “The lack of transparency in financial information, state budgets, and financial reports makes it difficult for governments to meet this democratic responsibility.”
This article was first published by The Center Square.