Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

Most US States Drowning in Red Ink

  by    0   0

The federal government isn’t alone drowning in debt. Most US states don’t have enough money to pay their bills either.

That was the conclusion of the Truth in Accounting annual State of the States 2018 report. According to the report, American states have racked up $1.5 trillion dollars in unfunded state debt. Much of the red ink is related to pension plans and retiree benefits

States, in general, do not have enough money to pay all of their bills. Based on our latest analysis, the total unfunded debt among the 50 states increased by $53.4 billion to more than $1.5 trillion in FY 2017. Most of this debt comes from unfunded retiree benefit promises, such as pension and retiree healthcare debt. This year, pension debt accounts for $837.5 billion, and other post-employment benefits—mainly retiree healthcare liabilities— totaled $663.1 billion.”

Forty of the 50 states do not have enough money to pay their bills. The report ranks the states based on their taxpayer burden. New Jersey earns the dubious distinction as the top “sinkhole state.” Each taxpayer in the Garden State is on the hook for $61,400. Connecticut ranks second with a debt burden of $53,400 per taxpayer. Illinois, Kentucky and Massachusetts round out the top five debtor states.

A few states (10) run surpluses. Alaska ranks as the state in the best fiscal condition, with an annual budget surplus of $56,500 per taxpayer. North Dakota, Wyoming, Utah and South Dakota round out the top five “sunshine states.”

Looking at percentages, 56% of US states earn a grade of D or F based on their fiscal condition according to the report. A ‘D; represents a taxpayer burden of between $5,000 and $20,000 (18 states). States with a burden of over $20,000 earn an ‘F.’ (10 states)

Ironically, every state except Vermont has a balanced budget requirement. But as the report put it, “in the world of government accounting, things are often not as they appear.” Here are some of the tricks states used as they managed to run up $1.5 trillion in debt while simultaneously “balancing” their budgets.

  • 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 so they aren’t included in the calculations

Underfunded pension plans by far account for the vast majority of state unfunded liabilities.

The most common accounting trick states use is hiding a large portion of employee compensation from the balance sheet and budget. Employee compensation packages include benefits such as healthcare, life insurance, and pensions. States become obligated to pay these benefits as employees earn them. Although these retirement benefits will not be paid until the employees retire, they still represent current compensation costs because they were earned and incurred throughout the employees’ tenure. Furthermore, that money needs to be put into the pension fund in order to accumulate investment earnings. If states didn’t offer pensions and other benefits, they would have to compensate their employees with higher salaries from which they would fund their own retirement.”

The bottom line is that if you’re depending on a fat government pension to fund your retirement dreams, your golden years could turn into a nightmare. As we reported about a year ago, you should probably shouldn’t assume any government pension will ever be paid.

This report highlights yet another aspect of America’s massive debt bubble that includes not only government red ink, but also corporate and household debt.  extreme debt load in America today is among the underlying economic fundamentals that simply can’t be ignored. The looming pension crisis serves as a vivid reminder of the impact of debt – personal, corporate, state and national. Debt is a powder keg and it is eventually going to blow up. Are you ready for the explosion?

Get Peter Schiff’s most important Gold headlines once per week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!


Related Posts

Inflation’s Up; So What?

Here’s a strange headline for you: “Gold prices near daily highs despite better-than-expected inflation in October.” This headline is bizarre on a couple of levels. First, since when are rising consumer prices and good news? And second, why wouldn’t inflation be good for gold? You really have to buy into the mainstream narratives to write […]

READ MORE →

Powell Lectures Congress About Government Spending the Fed Facilitates

Fiscal 2020 started just like fiscal 2019 ended – with a massive federal budget deficit. And that has Federal Reserve Chairman Jerome Powell worried. In an ironic bit of political theater, Powell lectured Congress about the spending he helps facilitate. The budget shortfall last month was 34% higher than the October 2018 deficit, coming in […]

READ MORE →

Student Loan Bubble Blows Up Another $32.9 Billion in Q3

American consumer debt pushed to a new record of $4.15 trillion in September. Part of that equation – the continued surge in the levels of student loan debt. Student loan balances jumped by $32.9 billion in the third quarter this year, pushing total outstanding student loan debt to a new record of $1.64 trillion. Student […]

READ MORE →

Gold Mine Output Has Flatlined

Gold mine output has flatlined over the last several years and that trend appears to be continuing in 2019. In fact, some analysts believe we may be at or near “peak gold.” According to the World Gold Council’s Gold Demand Trends Q3 report, gold mine output fell slightly with total mine production coming in at […]

READ MORE →

The Gold Market Is Strong With the Potential for Growth

Gold is the third-most consistently bought investment globally. This was just one of many findings in the World Gold Council’s recently released consumer research report that revealed a strong global gold market with the potential for future growth. Globally, there are clear perceptions of gold as a safe, durable, traditional store of value. As an investment, […]

READ MORE →

Comments are closed.

Call Now