A new report shows that America’s state governments are in deep financial trouble, collectively carrying $811 billion in debt. Truth in Accounting’s annual “State of the States” report reveals that at the end of fiscal year 2023, state governments had a total of $2.9 trillion in debt but only $2.1 trillion in assets. This gap will eventually need to be covered by taxpayers, as these states lack the funds to meet their promises.
Out of all 50 states, 27 have what’s termed a “taxpayer burden.” These states have unbalanced budgets, meaning each resident would need to pay an average of $900 to make up the shortfall. Massachusetts, New Jersey, Illinois, and Connecticut have the worst financial conditions, needing over $25,000 per resident to bridge the gap.
By contrast, 23 states received a “taxpayer surplus” rating from Truth in Accounting. North Dakota, Alaska, Wyoming, and Utah were awarded an “A” grade for their surplus exceeding $10,000 per taxpayer, highlighting their fiscal health.
The report attributes much of the debt to unfunded pensions and retiree healthcare benefits. About $840 billion is tied to pensions for public employees, while states have only saved 70% of the necessary amount. Another $493 billion is owed for retiree healthcare, but states have funded just 14% of that amount.
Researchers at Truth in Accounting warn that many states use “accounting tricks” to appear financially stable, underreporting their pension liabilities or counting borrowed funds as income. This lack of transparency, according to the report, disguises the true fiscal burden faced by taxpayers. Truth in Accounting is urging states to practice honest accounting and prioritize fiscal responsibility.