State of our States
What would you do if you received an unexpected bill for $10,000? A recent study ranks individual state debt as it pertains to each taxpayer.
The nonpartisan, non-profit organization, Truth in Accounting™ (TIA) was created in 2002 to “compel governments to produce financial reports that are understandable, reliable, transparent and correct”. Each September they release a comprehensive analysis of government accounting data from each of the 50 states to communicate their current financial health.
TIA measures this in terms of “Taxpayer Burden” – the amount each taxpayer would have to pay the state’s treasury in order for that state to be debt free. Records show this number continues to rise, stressing states’ abilities to pay for services and to repay debt.
Forty of the fifty states do not have enough funds to cover their obligations. As of 2016, TIA reports state unfunded debt (yet-to-be-paid pension obligations and retiree health care) totals $1.5 trillion. Of that amount, Pension-debt accounts for $832.6 billion owed to retirees and $614.9 billion owed to retiree-health-care funds. Those gaps will have to be closed if promised benefits are to be paid.
The remaining ten states, have enough to cover their planned obligations. The residence of these states, much like families who keep to their budget, gain security, flexibility and peace of mind.
The 2016 U.S. Report Card:
- A – Surplus greater than $10,000 per taxpayer: 3 States (Alaska, North Dakota, and Wyoming)
- B – Surplus between $100 and $10,000 per taxpayer: 6 states (Utah, Nebraska, South Dakota, Tennessee, Idaho, Iowa, and New Mexico)
- C – Deficit between $0 and $4,900 per taxpayer: 13 states (Oregon, New Mexico, Florida, Virginia, Arkansas, Indiana, Montana, Arizona, Georgia, Nevada, Colorado, Missouri, and Wisconsin)
- D – Deficit between $5,000 and $20,000 per taxpayer: 19 states (Oklahoma, Ohio, New Hampshire, Kansas, Texas, Minnesota, North Carolina, Maine, South Carolina, Washington, Mississippi, Rhode Island, Alabama, West Virginia, Pennsylvania, Maryland, Michigan, Vermont, and Louisiana)
- F – Deficit greater than $20,000 per taxpayer: 9 states (New York, California, Delaware, Hawaii, Massachusetts, Kentucky, Connecticut, Illinois, and New Jersey)
WHICH STATES ARE MOST IN DEBT?
These states have the worst taxpayer burden
#50 New Jersey
WHICH STATES HAVE SAVED THE MOST?
The following states have the highest taxpayer surpluses:
#2 North Dakota
The full report, along with an interactive map, can be found at www.statedatalab.org.
Washington State received a “D” grade and ranked 32 out of 50 in terms of per taxpayer deficit. To fund the expenses of our state, $25.9 billion would be required. When spread across taxpayers this creates a deficit of ($10,200) per taxpayer. Although Washington has a balanced budget requirement, the majority of its unfunded debt, is notably excluded from the balance sheet.
According to www.fixthedebt.org, the U.S. national debt continues to reach record highs. It’s grown over ten years from 35% of GDP to 2017’s current rate of 77%. U.S. national debt is projected to exceed the entire GDP in 2033.
These numbers directly impact each of us and can lead to devastating results, such as:
- Increased interest rates along with an increased cost of living.
- Fewer job opportunities and slower wage growth.
- Generational Injustice – harming the future of our children and grandchildren.
- High government debt loads could increase the tax burden, squeezing out private investment dollars.
- A weakened, insolvent social safety net (Social Security, Medicare, Medicaid and state aid).
As a nation, we’re forgetting the fundamental financial principles:
- Spend less than you earn.
- Save 10-15% of your gross income (before taxes & deductions).
It’s crucial we return to fundamentals and fiscal responsibility. History shows that governments, private corporations, and individuals who accept excessive debt loads as a way of life all suffer when the bubble bursts. We have a civic duty to understand our state’s finances and encourage politicians to spend our resources wisely.
Kevin Byrne, CFP®, MS is the owner of Byrne & Company Wealth Management, LLC (BCWM) and is a Registered Investment Advisor in Washington State. BCWM is a Fee-Only financial advisor and a member of NAPFA. www.byrneandcowealth.com.