Waste of the Day: States Are $811 Billion In Debt

Topline: America’s 50 state governments will need an extra $811 billion to pay off their current debt, according to the annual “State of the States” report from Truth in Accounting.

States do go into debt – er – taxpayer burden

Key facts: State governments had $2.9 billion in debt and only $2.1 trillion in assets at the end of fiscal year 2023, Truth in Accounting, a nonpartisan organization that promotes fiscal transparency and accountability, found. The gap will need to be covered by taxpayers sometime in the future.

Twenty-seven states have “taxpayer burdens,” meaning their budget is not balanced and they would need to collect at least $900 from every person in the state to eliminate their debt. Massachusetts, Illinois, New Jersey and Connecticut received a letter grade of “F” because they would need over $25,000 from every resident to pay their bills.

Only 23 states had what Truth in Accounting calls a “taxpayer surplus,” meaning they could pay off all of their debt and still have money to return to taxpayers. Four states received a letter grade of “A” because they have a taxpayer surplus above $10,000: North Dakota, Alaska, Wyoming and Utah.

Unfunded pension liabilities contributed $840 billion to the debt. States have promised to eventually pay pensions to teachers, firefighters, cops and more, but have only saved up 70% of the necessary cash.

Other post-retirement benefits are underfunded by $493 billion. They mostly consist of lifetime healthcare plans, for which states have saved up only 14% of the money they’ve promised to current employees.

Yet states have laws requiring balanced budgets

Researchers wrote that

Unfortunately, some elected officials have used portions of the money owed to pension and OPEB funds to keep taxes low and pay for politically popular programs. This is similar to charging earned benefits to a credit card without having the money to pay off the debt.

Underreporting pension liabilities is just one “accounting trick” politicians use to falsely claim their budgets are balanced, according to Truth in Accounting. Some states also overstate their revenue, count borrowed money as income, and more.

Every state has a law requiring their budget to be balanced, except for Vermont.

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Summary: The national debt makes headlines constantly, but the fiscal problems at the state level can’t be ignored.

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This article was originally published by RCI and made available via RealClearWire.