Some of America’s states are not in good financial shape.
A report from Truth in Accounting’s tenth annual Financial State of the States provided a comprehensive breakdown of how all 50 states fare financially. For advocates of fiscal restraint at the state level, such indices are very useful in learning about the fiscal health of their states.
The report highlights that states have introduced more transparency largely due to the “Generally Accepted Accounting Principles set by the Governmental Accounting Standards Board, which now require governments to disclose pension and other post-employment (OPEB) benefits on their balance sheets.” If the benefits in question do not receive full funding, they are categorized as liabilities, or debt, “because they represent money owed to government employees in their retirement.”
Of note, this year’s report discovered that 40 states don’t have enough money to pay all of their bills. Worse, states have accumulated a whopping total of $1.5 trillion in unfunded state debt. The study’s Taxpayer Burden or Surplus ranks states based on how much debt each taxpayer would have to shoulder on a per capita basis.
The bottom three states — Connecticut, Illinois, and New Jersey — have the highest debt burden per taxpayer.
Obviously, these three states have major spending problems that will require fiscal discipline in order for them to get back on sound financial footing. However, focusing on fiscal issues exclusively gives us an incomplete picture of what’s truly going on in these jurisdictions.
These states are also known for having forced unionization, sub-optimal tax policies, bad environments for starting a business, and their lack of affordable housing options thanks to heavy land-use restrictions. None of these are policy coincidences. It’s the product of state governments that believe in having a strong government presence in the way people interact with each other — whether it be social welfare or business operations. The government’s desire to either regulate or provide certain services stifles human innovation or comes at a high cost for future taxpayers.
Because of the short-term nature of politics, politicians don’t understand how distinct forms of state growth — social spending and government regulation — are interconnected. To have a functioning society based on liberty, policymakers cannot simply pick and choose which freedoms citizens can have. When the rubber meets the road, there has to be a comprehensive plan that moves towards maximizing freedom. By conceding that certain aspects of state infringements are acceptable, political actors do the heavy lifting for more ambitious successors who will likely expand upon previous interventions, if not find other areas to which they can control.