Financial watchdog: Texas mired in unfunded pension debt

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Texas pension

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].

10 COMMENTS

  1. Take the control of the pension away from the state and quit giving away pensions for votes. I know someone that will receive a state pension that will be the same as his salary, private industry doesn’t do this. They need to stop the pension program and go to a 401K and let the state make a contribution to it.

  2. The Texas monitor??? There’s a joke…I have a reputable anonymous report saying that Texas is the richest per capita area in the world!!! Debt free and straight A’s from every state including CA, NY and NJ! You morons are pathetic…

  3. how do public sector retirement systems work?
    The cities are responsible for the their retirees. The counties are responsible for their retirees. The state is responsible for their retirees.
    The article is written so that it looks like everything is lumped together and is the states responsibility which is not how it works.

  4. We had a poser running the House, Joe Straus, who is a democRAT in disguise. Hopefully they will not elect a clone, another RINO who will keep Texas from rising to the top.

  5. It’s frustrating and appalling that the “courts” are actually saying that future generations will continue to be legally responsible for DEFINED BENEFITS established by previous generations! Are the courts really supporting taxation on younger generations without representation?

    The general public’s concerns about those that are under-compensated and entitled to retirements may be valid concerns, but life is not fair. Their beliefs are now imbedded onto their children, who are unable to vote today, who will bear the costs of many enacted “Defined retirement benefit” pension programs. These folks have no empathy for their children and for future generations who did not vote for these programs, but will bear the taxation on them to fund generous programs elected by their elders.

    There may be some similarities with other inter-generational inequities, but the younger generations will at some time participate in Social Security and Medicare, but they will NEVER participate in the defined benefit pensions for their elders that they must bear the funding responsibilities.

    It’s time for a lawsuit that claims inter-generational inequity on financing “defined retirement benefit” pensions is unconstitutional. How can a judge claim that promises made by elected officials that require youths who have no voting power to pay those promises is fair???

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