Report: 39 States ‘did not have enough money to pay all of their bills’
State government finances are a mess this year, as government-ordered lockdowns in response to the coronavirus threw millions out of work and damaged the economy. What sort of shape state balance sheets in right now?
The website Truth in Accounting has released its annual “Financial State of the States” report and finds plenty of pain, and even more red ink:
The report found that 39 states did not have enough money to pay all of their bills. Most of the states were ill-prepared for any crisis, much less one as serious as what we are currently facing. Total debt among the 50 states amounted to $1.4 trillion at the end of the fiscal year 2019, which will only worsen as the states face varying and unpredictable effects from the global pandemic.
The bulk of state debt comes from pension obligations:
Most of this debt comes from unfunded retirement benefit promises, such as pension and retiree healthcare liabilities. This year, pension debt accounts for $855 billion, and other post-employment benefits (OPEB) totaled $617 billion. Furthermore, we have estimated that the 50 states could lose $397 billion in revenue as a result of the coronavirus pandemic.
The states in the best financial shape are Alaska, North Dakota, Wyoming, Utah, and Tennessee. The states in deepest trouble are New Jersey, Illinois, Connecticut, Hawaii, and Massachusetts.