A national watchdog group on Tuesday released a report ranking Texas 32nd among U.S. states in financial health, giving it a “D” grade.
Chicago-based Truth in Accounting, in its ninth annual Financial State of the States report, said Texas taxpayers would shoulder a debt burden of $10,100 each if the state paid off all of its liabilities today.
The analysis found that most of Texas’ debt burden of $82.2 billion comes from unfunded obligations promised to its public-sector retirees. In fact, the numbers would look pretty good without those – of $238.4 billion in retirement benefits the state has promised, it hasn’t funded $45 billion in pension and $65.5 billion in retiree health care benefits.
The bottom line, Truth in Accounting says, is that Texas has $76.1 billion in assets available to pay $158.3 billion worth of bills.
Texas and other states only began reporting true pension debt on their books in the past couple of years after mandated to do so by the federal Governmental Accounting Standards Board. States still don’t report retiree health care debt on their books, but that will change next year.
“Texas’ financial condition is not only alarming but also misleading as government officials have failed to disclose significant amounts of retirement debt on the state’s balance sheet,” the report states. “Residents and taxpayers have been presented with an unreliable and inaccurate accounting of the state government’s finances.”
The unfunded pension debt continues to grow in all levels of government due to retirement plans with assumed rates of stock market returns that are rarely achieved, financial watchdogs say. That problem led to investors’ services downgrading Fort Worth’s bond rating earlier this year, as The Texas Monitor reported. A report from the Texas Public Policy Foundation and the Reason Foundation found that the Austin Employees’ Retirement System is in financial crisis – for the same reasons.
Bill Bergman, director of research for Truth in Accounting, told The Texas Monitor that the changes by the GASB are a win for financial transparency, but the shift in numbers that’s about to take place on those balance sheets is “a big shoe that’s about to drop” in Texas and other states.
The report notes that since Texas has a balanced budget requirement, the taxpayer debt burden should be zero.
“In light of the boom in oil prices since 2001 it’s almost remarkable [Texas] isn’t in better condition that it is,” Bergman said. “Are these numbers consistent with your supposedly fiscally responsible Republican administration? I don’t think so.”
Texas is hardly alone in being mired in debt – Truth in Accounting found that 40 states don’t have enough money to pay their bills.
“This means that to balance the budget, elected officials have not included the true costs of the government in their budget calculations and have pushed costs onto future taxpayers,” Truth in Accounting notes.
The states collectively owed $1.5 trillion as of fiscal year 2017, with pension debt accounting for $837.5 billion and other post-employment benefits (mostly health care liabilities) accounting for $663.1 billion.
The top five fiscally responsible states according to the report were Alaska, North Dakota, Wyoming, Utah and South Dakota. The bottom five were New Jersey, Connecticut, Illinois, Kentucky and Massachusetts.
Johnny Kampis can be reached at [email protected].