Election results are in. New officials will take office, majorities may shift, and campaign promises will soon meet legislative reality. Yet for taxpayers, one fundamental problem remains unchanged: government accounting standards are far less rigorous than those required of corporations. Until that gap closes, it does not matter who wins. What matters is whether the numbers presented to the public are truthful enough to hold any politician accountable.
Two Sets of Rules
Corporations follow Generally Accepted Accounting Principles set by the Financial Accounting Standards Board. They must use full accrual accounting, recognizing revenues when earned and expenses when incurred, regardless of cash timing. Long-term obligations, including pensions and other post-employment benefits, must be reported on the balance sheet. This gives investors, creditors, and regulators a complete picture of a company's financial position. Public companies that miss filing deadlines or misstate results face serious consequences, including potential delisting.
State and local governments operate under different standards set by the Governmental Accounting Standards Board. For their key budgeted funds—the ones politicians cite when claiming a “balanced budget”—they use modified accrual accounting. This approach is closer to cash accounting. It allows governments to
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Treat borrowed money as revenue.
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Exclude or defer recognition of long-term liabilities such as unfunded pension promises and retiree health care.
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Push unpaid bills into the next fiscal year.
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Present governmental fund statements that look healthier than the government-wide statements prepared under full accrual rules.
Governments effectively keep multiple sets of books. The budget narrative and fund statements often tell one story. The Annual Comprehensive Financial Report (ACFR), when examined carefully, tells another story. Citizens are left without access to the same quality of information that corporate shareholders receive as a matter of course.
This is not a partisan observation. It is a structural one. The same rules apply regardless of which party controls the statehouse or city hall. Officials across the political spectrum have used the flexibility in government accounting to claim fiscal responsibility while passing costs on to future taxpayers.
What the Real Numbers Show
“Truth in Accounting’s” annual Financial State of the States report applies a consistent, full-accrual lens to the audited data governments themselves produce. We start with total assets, remove capital assets (roads, buildings, and infrastructure that cannot readily be sold to pay bills) and restricted assets, then compare the remainder to all obligations—including current-year pension and retiree health care liabilities. The result is a Taxpayer Burden™ or Taxpayer Surplus™: the amount each taxpayer would need to contribute (or would receive) if every bill came due today.
The latest report, covering fiscal year 2025, found that 24 states did not have enough money available to pay all their bills. Collectively, the 50 states had roughly $2.23 trillion in assets available against $2.85 trillion in obligations. Unfunded pension and other post-employment benefit liabilities remain the largest drivers of the shortfall. Some states show healthy surpluses. Others carry burdens measured in tens of thousands of dollars per taxpayer. The ranking and the underlying math are the same whether the governor is a Democrat or a Republican.
These figures are not abstract. They represent real potential future tax increases, service cuts, or both. When budgets appear balanced under modified accrual rules, the true cost of today’s spending is deferred. Voters cannot effectively judge performance or sustainability if the scoreboard is incomplete.
Standards That Outlast Any Election
Elections change the people in charge. They do not change the rules those people operate under. A newly elected official inherits the same accounting framework that allowed predecessors to underfund pensions, treat debt proceeds as revenue, and declare victory on budgets never truly balanced on a full-accrual basis.
The solution is not better politicians, but demanding accounting standards that make the government's true cost visible, no matter who holds office. Full accrual accounting for budgeting and reporting—or what we call FACT-based accounting (Full Accrual Calculations Technique)—would align the government more closely with the private sector. Revenues and expenses would be recognized when earned or incurred. Long-term promises would appear on key accountability statements. Borrowing would be identified as debt, not revenue.
Such standards would not dictate policy choices. They would simply make the consequences of those choices transparent. Taxpayers could then evaluate claims of fiscal health with the same clarity investors have when assessing a corporation. Legislators and executives would have to confront financial figures that cannot easily be manipulated through timing differences or selective presentation.
Looking Past the Ballot Box
The recent election cycle generated passionate debate about taxes, spending, and the size of government. Those debates will continue. But they will remain incomplete and often misleading until the financial reports underpinning them meet a higher standard of accuracy and transparency.
As new officials take their seats, the most important question is not simply who won. It is whether the accounting rules will finally require every public official, regardless of party or ideology, to disclose the true financial picture and the full cost of government. Only then can elections deliver genuine accountability.