Truth in Accounting releases its fourteenth annual Financial State of the States report, a comprehensive analysis of the fiscal health of all 50 states based on fiscal year 2022 annual comprehensive financial reports, the latest available data. According to the report, at the end of fiscal year 2022, 28 states did not have enough money to pay all of their bills. In total, debt among the states was $938.6 billion, which is down from $1.2 trillion at the end of fiscal year 2021. Overall, it appeared state debt decreased primarily due to the following two factors: tax revenue increases due to the lockdowns ending, and millions, if not billions, of dollars in federal COVID funds received by the states.
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State finances seemingly improved but were cushioned by federal funds
States collected billions of dollars in federal COVID funds in fiscal year 2022
CHICAGO – Taxpayers and citizens deserve easy-to-understand, truthful, and transparent financial information from their governments. This is the belief of Truth in Accounting, a think tank that analyzes and makes sense of lengthy, cumbersome, and sometimes misleading government financial reports. Today, in partnership with the University of Denver’s School of Accountancy, they released their fourteenth annual Financial State of the States (FSOS) report, which provides a comprehensive analysis of the fiscal health of all 50 states based on fiscal year 2022 annual comprehensive financial reports, the latest available data.
According to the report, at the end of fiscal year 2022, 28 states did not have enough money to pay all of their bills. In total, debt among the states was $938.6 billion, which is down from $1.2 trillion at the end of fiscal year 2021.
Overall, it appeared state debt decreased mostly due to the following two factors: tax revenue increases due to the lockdowns ending, and millions, if not billions, of dollars in federal COVID funds received by the states. Tourism and individual spending increased significantly so that most states collected more money from tax revenues, often improving a state’s ability to pay its bills.
Every state, except Vermont, has a balanced budget requirement. This means that to balance the budget—as the law requires in 49 states—states should not carry any debt. However, we found that most states could not pay all of their bills. When states do not have enough money to pay their bills, TIA takes the money needed to pay bills and divides it by the estimated number of state taxpayers. The resulting number is a Taxpayer Burden™. Conversely, a Taxpayer Surplus™ is the amount of money left over after all of a state’s bills are paid, divided by the estimated number of taxpayers in the state.
The majority of state debt comes from retirement plans, such as pension and retiree health care benefits. On average, the 50 states had only set aside 71 cents for every dollar of promised benefits to fund pensions and 11 cents for every dollar to fund retiree health care promises.
“We are happy to see state debt decreasing but states should not count on temporary federal funding and increased tax collections to fix their long-term problems,” says Sheila Weinberg, founder & CEO of Truth in Accounting. “Elected officials need to include the true costs of government in their budget calculations, including accruing retirement benefits so that they can make real progress towards a healthier financial future.”
Truth in Accounting’s Financial State of the States report provides valuable insights into the fiscal health of each state, including rankings, letter grades, pension data, and timeliness standards. No other report analyzes state finances in such detail or uses a consistent methodology to allow for comparisons between states and over time.
Founded in 2002, Truth in Accounting is dedicated to educating and empowering citizens with understandable, reliable, and transparent government financial information. Sheila Weinberg, founder and CEO, is a Certified Public Accountant with more than 40 years of experience in the field.