Truth in Accounting’s “State of the States” report reveals that state governments across America are grappling with an $811 billion debt, which ultimately falls to taxpayers. At the end of fiscal year 2023, states had accumulated $2.9 trillion in debt against only $2.1 trillion in assets. This significant gap raises concerns for the future as taxpayers are likely to bear the costs.
Twenty-seven states are facing what the report describes as “taxpayer burdens.” In these states, each person would need to contribute at least $900 to balance the books. Massachusetts, Illinois, New Jersey, and Connecticut, where each resident would need to pay over $25,000, received failing grades.
However, not all states are struggling. North Dakota, Alaska, Wyoming and Utah earned “A” grades, boasting taxpayer surpluses over $10,000. These states are among the 23 with enough resources to cover their debts.
Pension liabilities represent a large portion of state debt, with $840 billion tied to retirement funds for teachers, police, and other public employees. Although states have promised these benefits, they’ve only saved around 70% of the necessary amount. Another $493 billion is owed for healthcare benefits, though just 14% of that has been saved.
Truth in Accounting criticized some states for diverting pension funds to finance other projects and avoid tax hikes, calling this a risky strategy that pushes financial burdens onto future taxpayers. The group recommends stricter accounting practices to prevent states from hiding their true financial condition.