Some forty states have received a financial health grade of C or less due to the growing cost of state employee pensions and retirement healthcare expenses, notes a new report from a Chicago-based think tank.
And those expenses, according to the non-profit Truth in Accounting in its Financial State of the States report, is making it increasingly difficult for states to meet all of their other financial obligations.
Only ten states, according to the report, received a financial health grade of B or above, the vast majority of which were located in the West: Alaska, Idaho, Iowa, Nebraska, North Dakota, Oregon, South Dakota, Tennessee, Utah, and Wyoming.
The states with the greatest debt burdens, defined as “Sinkhole States,” were all located in the East or Midwest: Connecticut, Illinois, Kentucky, Massachusetts, and New Jersey.
Altogether, the total debt load of all the states topped the $1.5 trillion mark as of the end of fiscal year 2017.
The report gave Arizona an overall financial grade of C, noting that it was taking steps to tackle its debt load, but still had $8.8 billion in unpaid bills.
Colorado received a D for having in excess of $19.3 billion in debts, while New Mexico received the same grade for having $5.1 billion in what the report calls “unfunded retirement obligations that have accumulated over many years.”
The Truth in Accounting group has recommended that states should adopt a method of accounting called Full Accrual Calculations and Techniques, which it says will provide a more realistic basis for budgeting, putting on the books debts as they are incurred.
By Garry Boulard