Never mind claims of a balanced state budget: a new analysis published Tuesday found New York’s debts outweigh its revenues by $136.6 billion this fiscal year—or $20,500 per taxpayer.
Those tilted scales are why the think-tank Truth in Accounting awarded the Empire State an F in its annual “Financial State of the States Report,” and ranked its fiscal health ninth-worst in the United States. The group blames the imbalance on the state’s heavy and unfunded debt to future retirees, particularly in the form of contractually guaranteed health benefits.
The group’s founder and CEO Sheila Weinberg told Crain’s that the current state budget has funded 93% of its pension obligations, but only one cent for every dollar promised toward other post-employment benefits. By not counting these accruing costs in its annual revenue and spending plan, Weinberg asserted that the Empire State creates a false appearance of a balanced budget—and forces those costs onto future taxpayers.
“Employee compensation includes their salary, but it also includes the pension and health benefits,” she said. “But when the state does its budget, it doesn’t include the benefits the employees are earning every year.”
But the state won’t be able to get away with this sleight-of-hand much longer, Weinberg noted. A new rule by the Governmental Accounting Standards Board, a nationwide organization that lays out the practices and guidelines to which all municipalities adhere, will force New York to report its unfunded retirement liabilities beginning next year.
Numbers game
The Truth in Accounting assessment compares a state’s total receipts with its total obligations, and divides the remaining shortfall or surplus by the total number of taxpayers.
It touts this analysis as an alternative to credit ratings, which it argues “focus on the needs of bondholders, rather than the taxpayers.” The Financial State of the States report does not include bond debt in its analysis, a decision Weinberg defended on the grounds that her organization does not count capital assets paid for with such debt—such as roads, bridges and buildings—towards the state’s capacity to meet its obligations.
Normally, states and municipalities pass separate operating and capital budgets.
Almost all the report’s designated “Sunshine States,” which run budget surpluses, are sparsely populated energy producers that reap considerable revenues from extraction taxes. The highest ratings went to Alaska, North Dakota, Wyoming, Utah and Idaho. Similarly, its worst “Sinkhole States”—New Jersey, Illinois, Connecticut, Massachusetts and Hawaii—are more densely populated, with large service-oriented economies.
Weinberg, however, suggested that the surplus group simply doesn’t “overspend.” Moreover, she argued that states reporting “balanced budgets” that are in fact illusory represent a threat to the country’s democratic system.
“Citizens really don’t have the knowledge they need to be informed participants,” she said. “You’re making financial and policy decisions based on the wrong numbers.”
Although Truth in Accounting maintains its only interest is transparency, critics have highlighted its ties to the American Legislative Exchange Council and the State Policy Network, both right-of-center networks linked to the conservative Koch family.
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