State Governments in America Owe $811 Billion in Debt

Overview

The 50 state governments of the United States require an additional $811 billion to settle their existing debt, as stated in the annual "State of the States" report by Truth in Accounting.

Key Findings

As per the findings of Truth in Accounting, a nonpartisan organization that advocates for fiscal transparency and accountability, state governments had a debt of $2.9 billion and merely $2.1 trillion in assets at the close of the fiscal year 2023. The deficit will have to be compensated by taxpayers in the future.

Twenty-seven states are under "taxpayer burdens," which means their budget is not balanced and they would need to collect a minimum of $900 from every individual in the state to eradicate their debt. Massachusetts, Illinois, New Jersey, and Connecticut received an "F" grade as they would require over $25,000 from every resident to settle their bills.

Only 23 states had a "taxpayer surplus" as per Truth in Accounting, implying they could clear all of their debt and still have funds to give back to taxpayers. Four states, namely North Dakota, Alaska, Wyoming, and Utah, received an "A" grade as they have a taxpayer surplus exceeding $10,000.

Contributing Factors

Unfunded pension liabilities added $840 billion to the debt. Although states have pledged to pay pensions to teachers, firefighters, police officers, and others in the future, they have only accumulated 70% of the required funds.

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

The report states, "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, except for Vermont, has a law requiring their budget to be balanced.

Conclusion

While the national debt regularly makes the news, the fiscal issues at the state level cannot be overlooked.

Bottom Line

While the national debt often dominates headlines, it's crucial to consider the fiscal health of state governments as well. The fact that 27 states are under "taxpayer burdens" and the widespread underfunding of pension liabilities and post-retirement benefits are concerning issues. What are your thoughts on these findings? Feel free to share this article with your friends and discuss it further. Don't forget to sign up for the Daily Briefing, which is available every day at 6pm.