States across the country are in worse fiscal shape than they are telling voters, thanks in part to outdated accounting rules.
An advocacy group called the Institute for Truth in Accounting has released a report claiming that states are saddled with $900 billion in off-balance sheet debt, including pension and retirement health care obligations.
The group is calling for changes in governmental accounting rules to force states to recognize more of these liabilities up front on their balance sheets. It said taxpayer burdens in most states are continuing to grow due to poor budgeting rules and outdated accounting principles.
The annual report reviews each state’s financial condition and identifies the top five “sinkhole states”—that is, the states in the worst financial condition. The five “sinkhole states” and the amount each taxpayer would have to send to its state treasury are: Connecticut ($49,000), New Jersey ($35,800), Hawaii ($32,700), Illinois ($31,600) and Kentucky ($23,500).
The study showed that one state, Hawaii, saw its unfunded health care obligations increase by $3 billion in just one year. Four of the five “sinkhole states” now have larger per-taxpayer burdens compared to a similar report that the group released a year ago.
The report also names the top five “sunshine states,” the one that have enough assets available to pay their obligations. Those top five “sunshine states” and their per-taxpayer surpluses are: Alaska ($21,200), Wyoming ($20,200), North Dakota ($9,500), Utah ($2,600) and Nebraska ($2,400).
Four of the five “sunshine states” now have larger per-taxpayer surpluses than in the last annual report from the group. The “sunshine states” are becoming financially stronger while the “sinkhole states” are becoming more insolvent, according to the report.
“Antiquated government budgeting rules and accounting standards are to blame,” said Institute CEO Sheila Weinberg in a statement. “States pay only what is due during the current budget year, which does not take into account true long-term obligations on their balance sheets. Hundreds of billions of dollars of retirement liabilities are not reported, which pushes these costs onto future taxpayers.”
A copy of the full report is available at http://truthinaccounting.org.