The annual Financial State of the States report, which ranks states based on their financial health, found a marked difference in states controlled by Republicans and states controlled by Democrats, but also concluded that state fiscal health has worsened considerably over the last two years — despite a bailout from the federal government in the form of COVID-related relief.
The annual report ranks states according to how close they get to having a balanced budget. Truth in Accounting (TIA), the organization that compiles the report, explained, “Government reports are lengthy, cumbersome, and sometimes misleading documents. At Truth in Accounting (TIA), we believe that taxpayers and citizens deserve easy-to-understand, truthful, and transparent financial information from their governments.”
None of the top 10 states were Democrat-controlled, control being defined as one-party rule, with the governor and both houses of the legislature of the same party, while none of the bottom 10 were Republican-controlled. The top 10 states were:
The bottom 10 states were:
As to their findings, the report stated: “At the end of the fiscal year 2020, 39 states did not have enough money to pay all of their bills. This means that to balance the budget — as is required by law in 49 states — elected officials have not included the true costs of the government in their budget calculations and have pushed costs onto future taxpayers.”
TIA divides the amount of money needed to pay a state’s bills by the number of taxpayers to derive the Taxpayer Burden. If a state has money left over, that amount is divided by the number of taxpayers to arrive at the Taxpayer Surplus.
Unfortunately, only 11 states had a surplus. The combined debt of the states was $1.5 trillion, with the debt mostly the result of underfunded pension and retirement accounts. In 2020, pension debt accounted for $926.3 billion, while other post-employment benefits total $638.7 billion.
To break it down a bit, Alaska has a per taxpayer surplus of $55,000, while every Connecticut taxpayer will have to pay $62,500 to settle the state’s debt.
The report also noted that all of the state’s fiscal condition worsened in 2020 due to the pandemic, and all received bailout money from the CARES Act and other COVID-related grants. Despite this, the report concluded, “the majority of states’ finances worsened.”
The report lists three recommendations to citizens that can help force their states to be more fiscally responsible:
The conclusion here here is not a simple, “Republicans balance budgets and Democrats don’t.” The report found that most states don’t have a balanced budget.
However, certain policies such as big spending on government programs are typically characteristic of the left, as seen in the proposed $3.5 trillion budget reconciliation proposal on Capitol Hill, which includes numerous new government programs and entitlement benefits that even as the country grapples with a debt load that is fast approaching $29 trillion.
This strategy almost always leads to overpromising initiatives that the state will never be able to afford. Kicking the can down the road for the next generation is not a tenable solution. When governments make taxpayers pay for their reckless spending, they are stealing from the taxpayer.
Citizens need to somehow hold their officials accountable — at all levels of government, and that requires a citizenry that arms themselves with knowledge, discernment, and an understanding that free money is not free. An expansion of government programs only leads to more debt, and taxing the one percent will not even come close to absorbing it.
In order to pay for underfunded pensions, governments have to decrease wasteful spending in other areas, close loopholes for the ultra-rich, and promote business-friendly policies that actually grow revenues, grow jobs, and, ultimately, grow the tax base.