State of Debt
If you were looking for some good news about Connecticut’s economy this week, well, there wasn’t much of it to share.
First, the Chicago-based Institute for Truth in Accounting performed a rather thorough dissection of state finances, paying particular attention to assets and liabilities, including pension and retirement healthcare obligations.
The Institute used that analysis to develop and rank the debt burden on individual taxpayers in each state (i.e., each taxpayer’s share of the state’s debt).
HIghest debt per taxpayer
Connecticut ranked worst in the country, with each taxpayer liable for a $41,200 share of the state’s overall $53.35 billion in unfunded financial obligations.
“If governors and legislatures had truly balanced each state’s budget, no taxpayer’s financial burden would exist,” said Sheila Weinberg, the Institute’s CEO.
“A state budget is not balanced if past costs, including those for employees’ retirement benefits, are pushed into the future.”
For years, in budget session after budget session, Connecticut lawmakers have declined to properly fund the state’s long-term commitments to pension and retiree healthcare plans, letting the debt swell to alarming proportions.
Like many states, Connecticut manages retiree benefit payouts on a pay as you go basis, a tactic that leaves future generations of taxpayers on the hook.
In New Jersey, where Gov. Chris Christie this week signed legislation requiring state employees to contribute more to their pension and healthcare plans, the taxpayer burden is $34,600, second to Connecticut.
Illinois ($26,800), Hawaii ($25,000), Kentucky ($23,800), and Massachusetts ($20,100) also have individual taxpayer burdens exceeding $20,000.
Four states (Nebraska, North Dakota, Utah and Wyoming) currently have sufficient assets available to meet their debt obligations.
Moody’s sends warning shot
Also this week, Moody’s Investors Service dropped the outlook for the state’s $14 billion in outstanding bonds from stable to negative. That’s a warning the state’s bond rating could be downgraded.
Amid the collapse of the $1.6 billion budget agreement with unions, the agency cited the state’s “depleted reserves with slim prospects for near-term replenishment.”
“In the absence of a clearly articulated plan to achieve meaningful improvement in the state’s pension funded ratios and reduce its fixed costs, as well as progress toward adequate reserve levels, Connecticut’s rating could be downgraded,” Moody’s said in a press release.
Last year, Moody’s downgraded the state’s bond rating from Aa3 to Aa2, after lawmakers used a patchwork of borrowed money, surplus funds, and payment deferrals to meet operating expenditures while draining the rainy day fund.
Both the Moody’s report and the IFTA findings should weigh heavily on legislators’ minds Thursday as they return to the State Capitol to resolve the hole in the state’s two-year, $40.1 billion budget.
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