Arizona’s ‘state of the state’ grim – but Oklahoma’s is worse
CapitolBeatOK Staff Report
Chicago, Illinois – This week, the Institute for Truth in Accounting released Arizona’s “Financial State of the State,” the latest in the group’s ongoing series examining the extent of debt and taxpayer burdens in all 50 states.
After an extensive review of Arizona’s 2009 audited financial report, the Institute determined the State is in a precarious financial position because it does not have the funds available to pay $10.1 billion of the State’s commitments as they come due. Each taxpayer’s share of this financial burden equals $5,700.
Arizona state law requires a balanced budget. “If governors and legislatures had truly balanced the state’s budget, no taxpayer’s financial burden would exist,” said Sheila Weinberg, founder and CEO of the Institute for Truth in Accounting (IFTA). She continued, “A state budget is not balanced if past costs, including those for employees’ retirement benefits, are pushed into the future.”
While Arizona reported total assets of $35.6 billion, the Institute’s review of the state’s 2009 financial report revealed that there are more than $2.1 billion of off-balance sheet retirement liabilities. More than $28.3 billion of the State’s assets cannot be easily converted to cash to pay State bills of $17.2 billion as they come due. These assets consist of capital assets, including infrastructure, buildings and land, and assets the use of which is restricted by law or contract. The State does not have the funds needed to pay for $10.1 billion of state obligations.
Many of the obligations relate to state employees’ pension and retirement health care benefits. Years of over-promising retirement benefits, while shortchanging funding, have resulted in the state’s retirement systems being underfunded by $2.1 billion. As of June 30, 2009, the state had set aside only 79 cents to pay for each dollar of benefits promised. As of that date only $7.8 billion was deposited into the retirement systems, even though the actuaries calculated that a minimum of $9.9 billion should have already been contributed.
The Arizona 2010 audited financial report has not been issued more than 270 days after the State’s fiscal year end. The Arizona “Financial State of the State”, available at www.truthinaccounting.org and Arizona.StateBudgetWatch.org provides this accounting by outlining the financial situation of the State, including unfunded liabilities to the State’s retirement systems.
Of the 29 states the institute has examined so far, Arizona is the eighth best, or 22nd worst, of the states in terms of the financial burden taxpayers would carry if the existing debts had to be paid now. By way of comparison, Oklahoma is the 18th best, or 12th worst by that measure.
Oklahoma, Arizona, and virtually every other state investigated by IFTA have at least one issue in common, and that is the unfunded burdens embedded in pension and retirement benefits for employees of state government. An overview of Oklahoma’s situation was offered in the February 2 story for CapitolBeatOK, “For Oklahoma, other states: financial gaps, per-taxpayer burdens are Good, Bad, Ugly.”
Concerning Oklahoma, Weinberg commented when completing her investigation of Sooner State financial burdens last year: “Years of over-promising pension benefits, while shortchanging the funding of the pension systems have resulted in the state’s pension funds being underfunded $14.8 billion. For the state’s fiscal year that ended June 30, 2009 only $1 billion was deposited, even though the pension systems’ actuaries calculated that a minimum of $1.3 billion should have been contributed.”
In comparison to Arizona’s per-taxpayer burden of $5,700, the levy in Oklahoma would be $14,800 if the bill came due.
About the Institute for Truth in Accounting (IFTA): The group describes itself as “dedicated to promoting honest, accurate, and transparent accounting at all levels of government and business. As a non-partisan, non-profit organization, the IFTA works to expose accounting deficiencies while promoting better, more accessible delivery of accurate government financial data — and, in turn, providing a foundation for more informed public policy. The IFTA provides its expertise to develop more effective accounting standards and deliver accurate government financial information to policymakers, opinion leaders, and citizens, so they can all work for a more secure financial future.”
Note: Editor Patrick B. McGuigan contributed to this report.