Report: 28 states couldn't cover their bills in fiscal 2022, while 22 states recorded surpluses

In fiscal 2022, 28 states didn’t have enough revenue to pay all of their bills, according to the 14th annual Financial State of the States report published by the Chicago-based nonprofit Truth in Accounting.

The report provides a comprehensive analysis of the fiscal health of all 50 states based on the latest available data from states’ fiscal year 2022 annual comprehensive financial reports.

New Jersey ranked last for having the worst fiscal health and the greatest taxpayer burden. Not far behind was Connecticut, followed by Illinois, Massachusetts, Hawaii, Kentucky, Delaware, Louisiana, California and Vermont in the bottom ten.

By contrast, 22 states reported surpluses, the majority of which are led by Republican governors.

Alaska ranked first for having the best fiscal health and highest taxpayer surplus. North Dakota, Wyoming, Utah, Tennessee, Nebraska, Idaho, Oregon, South Dakota and Oklahoma ranked in the top ten.

Total debt obligations of all 50 states was $938.6 billion, down from $1.2 trillion at the end of fiscal year 2021, the report found. Overall, state debt appeared to have decreased primarily because “tax revenue increases due to the lockdowns ending, and millions, if not billions, of dollars in federal COVID funds received by the states.” Tourism and individual spending also increased. With increased spending, states collected more tax revenue.

Every state, except Vermont, has a balanced budget requirement, the report notes. The other 49 states have laws that require their state legislature to produce a balanced budget. TIA argues this means “states should not carry any debt. However, we found that most states could not pay all of their bills.”

The difference between state revenue and what’s needed to pay its bills divided by the estimated number of state taxpayers is what TIA defines as a Taxpayer Burden™.

New Jersey had the highest taxpayer burden of $53,600 per taxpayer. Connecticut was not far behind with $50,7000 per taxpayer burden. Illinois ranked third worst with $41,600 in per-taxpayer burden.

Twenty-eight states reported debts and taxpayer burdens: New Jersey, Connecticut, Illinois, Massachusetts, Hawaii, Kentucky, Delaware, Louisiana, California, Vermont, South Carolina, New York, Michigan, Maryland, Pennsylvania, Rhode Island, New Mexico, Mississippi, Alabama, Kansas, Texas, Maine, Washington, New Hampshire, Nevada, Missouri, Arizona and Georgia.

The least worst had minimal taxpayer burdens: Nevada ($900), Missouri ($700), Arizona ($600), and Georgia ($5).

Twenty-two states reported a Taxpayer Surplus™, the amount of money left over after the state paid its bills divided by its estimated number of taxpayers.

Alaska had the highest surplus of $80,000 per taxpayer followed by North Dakota’s $47,400 and Wyoming’s $24,600. Other states reporting surpluses include Utah, Tennessee, Nebraska, Idaho, Oregon, South Dakota, Oklahoma, Iowa, Virginia, Montana, Minnesota, North Carolina, Indiana, Florida, Wisconsin, Colorado, West Virginia, Arkansas and Ohio.

The majority of state debt comes from retirement plans like pensions and retiree health care benefits. On average, all 50 states set aside 71 cents for every dollar of promised benefits to fund pensions and 11 cents for every dollar to fund retiree health care benefits.

Sheila Weinberg, founder & CEO of Truth in Accounting, suggests that elected officials “include the true costs of government in their budget calculations, including accruing retirement benefits so that they can make real progress towards a healthier financial future.”

The report was produced in partnership with the University of Denver’s School of Accountancy.