More than two dozen state governments did not have enough money to pay all their bills.
Truth in Accounting, a think tank that analyzes government financial reports, included the finding in its fifteenth annual Financial State of the States report, which ranks all 50 states by financial health.
Every state, except Vermont, has a balanced budget requirement. Yet the states needed more than $811 billion in additional funds to pay their bills at the end of fiscal 2023.
To balance the budget — as is required by law in 49 states — elected officials have pushed current costs onto future taxpayers. The costs that will continue to increase as inflation rises, TIA officials said.
The majority of state debt can be attributed to unfunded retirement liabilities.
Combined, the debt among the 50 states totaled $2.9 trillion, while assets totaled $2.1 trillion. This debt includes $840 billion in pension liabilities and $492 billion in other post-employment benefits, primarily for retiree health care costs.
Since most state retirement plans are invested in the stock market, Wall Street influences government debt reporting.
During strong market performance, the value of pension systems’ investments can make state debt seem lower. However, TIA said these gains are only on paper, meaning the reduction in debt may not reflect the true financial situation.
A state’s poor financial health affects not only residents and taxpayers, but also workers who count on these pension and health care benefits for their retirement.
Taxpayers are on the hook for their state’s debt, including unfunded pension and retiree health care promises. To help taxpayers better understand their governments’ financial situation, Truth in Accounting breaks down each state’s debt into a per-taxpayer number — a Taxpayer Surplus or Taxpayer Burden.
For example, Connecticut moved into last place because it needed more than $64.9 billion to pay its bills. Dividing that figure by the number of Connecticut taxpayers reveals the Taxpayer Burden is $44,300
Conversely, North Dakota had more than enough money to pay its bills with a Taxpayer Surplus of $55,600.
For most states, the data in this report is sourced from the audited Annual Comprehensive Financial Reports for fiscal year 2023, representing the most recent information available.