A new financial review awarded “F” grades to 10 states that did not have balanced budgets and have taxpayer burdens of over $20,000 per year.
The bi-partisan Truth in Accounting (TIA) review plows through the voluminous comprehensive annual financial reports (CAFRs) for each of the 50 states to determine their solvency and burden on taxpayers, and awards them appropriate letter grades.
TIA found that for the 2017 fiscal year, 40 states did not have enough money to pay all their bills, because: “elected officials have not included the true costs of the government in their budget calculations and have pushed costs onto future taxpayers.”
TIA divides the amount of money needed to pay bills by the number of state taxpayers to come up with the Taxpayer Burden™. If there is net money available after bills are considered, the funds are divided by payers to calculate Taxpayer Surplus™.
Based on TIA’s analysis, total unfunded debt among the 50 states at the end of FY 2017 increased by $53.4 billion, to more than $1.5 trillion. Most of this massive debt was associated with $837.5 billion of unfunded pension liabilities and $663.1 of retiree post-employment and other benefits.
TIA awarded “Top Five Sunshine States” for those that had the best combination of surplus and low Taxpayer Burden. This year’s winner was Alaska, with a $56,500-per-taxpayer surplus; followed by North Dakota with $24,900, Wyoming with $19,600; Utah with $4,400; and South Dakota with $3,100. Honorable mentions for having a positive surplus per taxpayer included Idaho, Tennessee, Nebraska, Oregon, and Iowa.
New Jersey won the Booby prize for the worst of the “Top 5 Stinkhole States” for a second year in a row with a 2017 deficit per taxpayer of -$61,400. Connecticut moved up to the second-worst with a deficit per taxpayer of -$53,400; followed by Illinois with -$50,800; Kentucky with -$39,200; and Massachusetts with -$33,500.
Several states that usually come in for big media criticism due to extremely high taxes and poverty did not make the Top 5 Stinkhole. But the reason that California’s taxpayer deficit was only -$22,000 and New York’s was only -$21,500 may have been due to huge capital gains from what happy stock trades are calling the “Trump Bump.” Every state, except for Vermont, has a balanced budget requirement.
Truth in Accounting blames “accounting tricks” for 80 percent of the states failing to meet the balanced budget requirement including: 1) Inflating revenue assumptions; 2) Counting borrowed money as income; 3) Understating the true costs of government; and 4) Delaying the payment of current bills until the start of the next year fiscal year so they aren’t included in the calculations.
The most common accounting trick states employ is to hide large portion of employee compensation from their balance sheet and annual budget, such as benefits accrued for healthcare, life insurance, and pensions. TIA comments that although pension benefits are not paid until after retirement, states become obligated to pay those benefits as employees earn them.
Truth in Accounting is especially critical of the fact that despite all states being required by the Government Financial Officers Association to publish their CAFRs within 180 days after the end of the fiscal year, 23 states took more than 180 days to make public their annual financial reports.