The debt of all 50 states totaled $1.5 trillion at the end of 2020, severely underfunding pensions and other postemployment benefits. That’s according to Truth in Accounting’s 12th annual Financial State of the States report, which ranks states based on their financial status.
This year’s surveys the fiscal health of the 50 states during the beginning of the Covid-19 pandemic.
The five best states were Alaska, North Dakota, Wyoming, Utah, and South Dakota, while the five worst were Hawaii, Massachusetts, Illinois, New Jersey and Connecticut.
At the end of 2020, 39 states didn’t have enough money to pay their bills, the report found.
Collectively, the 50 states’ unfunded pension liabilities were $926.3 billion.
That means for every $1 of pension benefits promised to its workers, states have only set aside 64 cents on average.
That becomes a problem when enough workers retire to exhaust the pension savings and states can no longer can cut pension checks.
On top of that are other postemployment benefits, or OPEB, for which the 50 states underfunded by $638.7 billion.
For every $1 of those promised benefits, mostly for retiree health care, states have only set aside 8 cents on average.
Unsurprisingly, even with federal assistance, state debt got worse at the beginning of the Covid-19 pandemic and the short recession that followed in early 2020.
Beyond their financial issues, the transparency score went down overall among the states.
Without transparency in government finance, residents don’t know what their state government is costing them, and elected officials are able to spend more than they’re taking in, sinking further into debt.
State governments should not only come clean about how and why they spend taxpayer money, they should take concrete steps to spend that money more wisely and avoid additional debt.
The #WasteOfTheDay is presented by the forensic auditors at OpenTheBooks.com.