Connecticut has the third highest individual taxpayer burden—the amount you would have to contribute to cover the state's debts—according to a new report released this week.
Every Connecticut taxpayer would have to pay $49,500 to cover the state's $63 billion debt, according to the nonprofit, nonpartisan research organization Truth in Accounting.
TIA's Financial State of the States report ranks Connecticut 48th for its ability to pay all its debts—a slight improvement from 49th in 2015.
Connecticut's taxpayer burden grew by $500 from 2015 to 2016. In all, 41 states lack the funds to pay their debts.
Nine states have a taxpayer surplus, led by Alaska ($38,200), North Dakota ($24,000), Wyoming ($20,500), Utah ($4,600), and Nebraska ($2,600).
Fiscal Health Counts
"Fiscal health counts in economic development," said CBIA economist Pete Gioia.
"A bottom five ranking for fiscal health is a terrible message both to businesses that are here and those we are trying to attract."
Taxpayers in just two states—New Jersey with an individual burden of $67,500 and Illinois at $50,400—face a greater burden than in Connecticut.
The report notes that while Connecticut's debt is a staggering $63.6 billion, the larger issue is that officials here and in other states hide the overall debt amount from residents.
"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 report states.
"This skewed financial data gives state residents a false impression of the state's overall public health."
The report claims that many states balance budgets with accounting tricks that include:
- Inflating revenue assumptions
- Counting borrowed money as income
- Understating the true costs of government
- Delaying the payment of current bills until the start of the next fiscal year
Fiscal health counts in economic development.
The state's unfunded pension benefits are $27.6 billion, with an additional $21.8 billion in unfunded retiree healthcare liabilities.
"Connecticut is again at the wrong end of a 50-state national ranking," Gioia said. "It's time to turn the tide."
The report also criticizes Connecticut's long-term failure to properly fund the state employee retirement system, a significant contributing factor to the state's ongoing fiscal crisis.
"This is like charging earned benefits to a credit card without having the money to pay off the debt," the report says.
"Instead of funding promised benefits now, they have been charged to future taxpayers."
In February, state lawmakers narrowly approved an agreement Gov. Dannel Malloy reached with state employee unions to spread payments to the state pension fund over several years.
Gioia said while the deal will stabilize future payments to the pension fund, long-term structural changes are needed to address growing unfunded liabilities.
“Without this agreement, which is essentially a refinancing of the state's obligation, the state would be forced to make significant cuts to services, or yet again raise taxes—to unparalleled levels," Gioia said.
“However, we still need comprehensive structural reforms, including ending the use of overtime pay to calculate pensions, which can double and even triple a retiree's base pay, and stopping cost-of-living increases that exceed in percentage points what the pension fund earns annually."
The TIA report issued letter grades for state finances.
Three states got As, six got Bs, 13 got Cs, 19 received Ds, and nine—including Connecticut—scored an F.
"States in general do not have enough money to pay their bills," the report's authors noted.
"Based on our analysis, the total state debt nationwide amounts to $1.5 trillion in unfunded debt."
TIA released its report the same day Moody's Investor Service warned the state faced a "stark" long-term fiscal outlook.
Moody's called Connecticut's long-term obligations formidable, based on heavy debt, growing pension liabilities, shrinking tax revenues, and rising fixed costs.