"The average person in the U.S. is around $96,400 in debt. Now, if Americans would be charged by their hometowns and cities for the debt they have taken on in the name of their residents, a fairly big sum would be added to that tally.
According to a new report by think tank Truth in Accounting, 50 out of the 75 largest cities in the country are currently running a deficit—in some cases a major one. If New York City, for instance, would divide the money amiss in its FY2021 budget among all of its taxpayers, this would add the hefty sum of $56,900 to each New Yorker’s debt.
New York City has the biggest deficit out of the 75 most populous cities in the U.S., put at a whopping $171.5 billion in 2021 by the organization. However, when comparing with an earlier report citing 2017 numbers, the city’s debt has gone down by around 11%. In contrast, the rest of the top 5 municipal debtors in the U.S. have piled on rather than shed liabilities in the past four years.
This phenomenon is most visible in New Orleans, where municipal debt per taxpayer increased by almost a third since 2017 and now stands at $22,700. The city rose from being the 10th most in debt to the 5th most in debt during this time frame. Portland meanwhile climbed from rank 8 into rank 4.
Where are the employee pensions?
A major point that Truth in Accounting is pointing out in its reports is how excessive municipal debt can endanger city workers’ pensions and similar benefits. In the case of New Orleans, the report states that only 55 cents for every dollar of pledged pension benefits had been put away. In Portland, this number stood even lower at only 44 cents to the dollar.
Despite being obligated to pay employees’ pension and retiree health care benefits when these come up, many cities decide to put off building these funds and even omit the respective items from city balance sheets. Balancing a budget by only listing payments going out or coming in during a specific fiscal year is another insufficient technique applied by cities, according to the report, as it fails to account for obligations a city might incur and would have to start putting money aside for in that year. Pension funds are often invested in the stock market, adding potential for solid returns but also risk—as the market situation in 2022 has shown.
On the other side of the ranking are Washington D.C., San Francisco and Irvine, Calif. All cities made a sizable surplus in FY2021 in part due to favorable market conditions—an instance that will have helped them still balance their budgets in the downturn year of 2022."
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