Truth in Accounting (TIA), a think tank that analyzes government financial reporting, found that Kentucky has the fourth worst taxpayer burden in the nation.  Taxpayer burden is the amount each taxpayer would have to pay in order for the state to be debt free. These findings are released today in TIA’s annual Financial State of the States report, which ranks all 50 states by their financial health.

Kentucky’s ranking classifies the state as a bottom Sinkhole State, one of five states with the worst taxpayer burden. The five bottom Sinkhole States are:

1. New Jersey’s taxpayer burden: $67,200
2. Illinois’ taxpayer burden: $50,400
3. Connecticut’s taxpayer burden: $49,500
4. Kentucky’s taxpayer burden: $39,000
5. Massachusetts’ taxpayer burden: $32,900

“Kentucky’s taxpayer burden is the result of political double speak,” said Sheila Weinberg, Founder and CEO of TIA. “They’ve promised these benefits on paper but are not setting aside the funds to make these promises, and as a result, the debt balloons.”

Why is Kentucky’s taxpayer burden so high? According to TIA’s analysis, the state is $48.9 billion in debt: $41.3 billion of this debt is from unfunded pension benefits; $4.9 billion is from unfunded retiree health care benefits. These unfunded benefits are promises the state has made to public servants like teachers and police officers, but because the state uses accounting gimmicks when calculating its finances, they don’t report the accurate figures. Therefore, the state is off by $9.1 billion on their latest financial reports released to the public. As a result of Kentucky’s high taxpayer burden, the state receives an “F” on TIA’s grading scale.  

“The average household income in Kentucky is $45,200, and the individual taxpayer’s share of the debt is $39,000 – that should be alarming,” said Weinberg. “The government can’t credibly expect to collect all that money. It will be interesting to see what they have to say to the benefit holders when the checks come due.

Taxpayer burden is a trademark of Truth in Accounting.

 TIA found that the scale of Kentucky’s financial predicament is an extreme case, but almost all states encounter similar challenges on a smaller scale. The average taxpayer burden across all 50 states comes out to $9,900, and only nine states have a taxpayer surplus.

Across all 50 states, TIA calculated a total of $1.5 trillion of unfunded debt, a huge financial burden for current and future taxpayers. Taxpayer burden is more than just a number – it can also be linked to a lower quality of life, poor highway systems, and the slow home price recovery.

The full 50-state ranking can be found online here (PDF)

The Financial State of the States report is an in depth study of the 50 states’ financial conditions for the most recent Fiscal Year. Data for this report was derived from states’ 2016 financial reports and related retirement plans’ actuarial reports.

Founded in 2002, Truth in Accounting is dedicated to educating and empowering citizens with understandable, reliable, and transparent government financial information. Sheila Weinberg is a Certified Public Accountant with more than 30 years of experience in the field.