Last week, we questioned whether Congress would ever get serious about paying down the national debt. Now we pose a similar question of our state elected officials.
There have been some successes, like the adoption of some much-needed, albeit modest, pension reform measures in 2012, and nearly eliminating the “wall of debt,” as Gov. Jerry Brown described a number of short-term liabilities that once totaled nearly $35 billion. But even these efforts have put only a small dent in the state’s total debt.
This point was crystallized by a new study from financial watchdog group Truth in Accounting, which just released its annual “Financial State of the States” report. The study found that “41 states do not have enough money to pay all of their bills, and, in total, the states have racked up over $1.5 trillion dollars in unfunded state debt.”
Not surprisingly, the Golden State did not fare well in the analysis, ranking 43rd in terms of debt per taxpayer, and comprising one of nine states to earn an “F” grade. “Repeated decisions by state officials have left the state with a staggering debt burden of $255.1 billion,” the report concluded. “That burden equates to $21,600 for every California taxpayer.”
Even this may be understated. Using more conservative discount rates for the state’s pension systems, which many financial experts feel are more realistic than the systems’ own assumptions (even though these have been lowered somewhat in recent years), the unfunded pension liabilities alone have been estimated in the high hundreds of billions of dollars, and perhaps as much as $1 trillion. This would put the debt burden at close to $100,000 per person.
To make matters worse, the state is far from up-front about just how much debt it maintains. “These statistics are troubling, but what’s more troubling is that state government officials continue to obscure large amounts of retirement debt on their balance sheets, despite new rules to increase financial transparency,” the study asserted. “This skewed financial data gives state residents a false impression of their state’s overall financial health.”
Moreover, the report noted, California was one of the most tardy in publishing its 2016 Comprehensive Annual Financial Report, which took 265 days to release after the end of the fiscal year — nearly three months after the supposed 180-day deadline.
We are already seeing the effects of such debt. Local governments whose…