FOR IMMEDIATE RELEASE
Contact: Courtney Houtz
Majority of state finances worsened during beginning of pandemic
CHICAGO — Truth in Accounting (TIA), a think tank that analyzes government financial reports, found that 39 state governments did not have enough money to pay all of their bills last year. These findings are released today in the twelfth annual Financial State of the States report, which ranks all 50 states by their financial health. TIA analysts draw their data from the fiscal year 2020 audited Annual Comprehensive Financial Reports, which is the latest available data.
Despite receiving federal assistance from the CARES Act and other COVID-19 related grants, the majority of states’ finances worsened. Total debt among the 50 states amounted to $1.5 trillion at the end of the fiscal year 2020, which was just the beginning of the COVID-19 pandemic.
Every state, except Vermont, has a balanced budget requirement. This means that to balance the budget—as is required by law in 49 states—elected officials should include the true costs of the government in their budget calculations. However, these financial reports show that they did not do this, and have pushed costs onto future taxpayers.
There is some good news as the report found that 11 states had at least some money set aside to pay their bills. Yet these states still received federal aid. These states deserve recognition for truly balancing their budgets but the uncertainty surrounding this current crisis makes it impossible to determine how much will be needed to maintain government services and benefits.
Most states could not pay all of their bills. When states do not have enough money to pay their bills, TIA takes the money needed to pay bills and divides it by the estimated number of state taxpayers. The resulting number is a Taxpayer Burden™. Conversely, a Taxpayer Surplus™ is the amount of money left over after all of a state’s bills are paid, divided by the estimated number of taxpayers in the state. The average Taxpayer Burden across the 50 states was $9,300 for fiscal year 2020, which is $2,000 worse than the prior year.
The majority of state debt comes from retirement plans, such as pension and retiree health care benefits. On average, the 50 states had only set aside 64 cents to fund pension promises and 8 cents to fund retiree health care promises. The downturn in the market at the beginning of 2020 caused many state retirement plans to make far less money than is necessary to cover ever-growing liabilities. When states cannot make up investment shortfalls, then taxpayers have to make up the difference.
“The majority of states were financially unprepared for any crisis.” says Sheila Weinberg, founder and CEO of Truth in Accounting, “When states can’t pay their bills, taxpayers are on the hook.”
View this year’s full Financial State of the States report here. The full 50 state ranking is included below.
The Financial State of the States report is an in-depth study of the financial condition of the 50 states. The data for this report was derived from states’ 2020 annual comprehensive financial reports and retirement plans’ reports.
Founded in 2002, Truth in Accounting is dedicated to educating and empowering citizens with understandable, reliable, and transparent government financial information. Sheila Weinberg, founder and CEO, is a Certified Public Accountant with more than 40 years of experience in the field.
*As of September 15, 2021, Iowa had not released its FY 2020 audited financial report. The state instead released a preliminary, unaudited report which was used for this report.
**As of September 15, 2021, California had not released its FY 2020 annual comprehensive financial report. As a result, FY 2019 data was used for the state of California in this report.