OPINION:
The $17.8 trillion of national debt is only the beginning of the nation’s red ink. There’s trillions more, thanks to the profligacy of state governments.
Truth in Accounting, a Chicago-based think tank, puts the numbers to the total level of state indebtedness, and they’re not pretty. The states are ranked, and nine are “sunshine” states that could meet their obligations. The rest are “sinkholes” that conceal an alarming level of debt.
Connecticut is the deepest sinkhole with $61.4 billion in debt, which is about $48,000 per taxpayer, and that’s in addition to $60,000 every taxpayer owes to overspending in Washington. Connecticut residents would be right in asking how they could be on the hook for so much when the state, like most others, is required to balance its budget each year. That’s because clever accountants are fudging the numbers. “Since employee-retirement benefits are not immediately payable in cash,” the Truth in Accounting report explains, “the related compensation costs have been ignored when calculating balanced budgets.”
State government accountants don’t use the “generally accepted accounting principles” of the private sector. Under the government’s special rules, it’s easier to balance the books because certain outstanding bills don’t appear on the balance sheets.
This sweetheart scheme enables Nevada to boast a positive balance in its pension system of more than a quarter-million dollars. Accounting experts used the private sector’s accounting rules to analyze the state’s obligation and found the “surplus” is actually a debt of $48 billion.
Sheila Weinberg, founder of Truth in Accounting, explains that the discrepancy arises from the fact that state accountants ignore liabilities from jurisdictions within the state, such as counties and cities.
In Pennsylvania, the 13th-most debt-laden state, public-sector retirees are promised pensions and health benefits far beyond what any sensible budget would allow. Pennsylvania politicians don’t want a confrontation with the unions, so they leave the problem for their successors to deal with in the future, where there be monsters.
The unfunded commitments to state employees add up to $53.8 billion, with no way of fulfilling the promise. This is concealed on a balance sheet using government accounting tricks that Houdini would envy, showing just $3.2 billion in debt.
In 2002, Congress cracked down on fraudulent financial statements with the Sarbanes-Oxley Act, a response to the collapse of Enron. No attention has yet been paid to honest financial statements from government jurisdictions that dwarf the bankrupt energy company.
Accounting rules that are good enough for the private sector ought to be good enough for the government, and at every level. At the least, the public sector should stop using tricks to conceal long-term, unfunded obligations.
Sarbanes-Oxley requires the CEOs of publicly traded companies to sign their financial statements and holds them personally liable for errors, exaggerations and lies. These standards should hold mayors, governors and the president accountable for their performance in office, too.
Please read our comment policy before commenting.