Comprehensive study of 50 states ranks Oklahoma among the worst in unfunded liabilities
Published: June 27th, 2011
Today (Monday, June 27), the Institute for Truth in Accounting (IFTA) announces completion of a significant, comprehensive study of all 50 states’ assets and liabilities, including pension and retirement healthcare obligations. Oklahoma is ranked 30th among the states (with first the most desirable, and 50th the least, in the institute’s assessment).
The study determined that six states had a per taxpayer burden over $20,000: Connecticut ($41,200), Illinois ($26,800), Hawaii ($25,000), Kentucky ($23,800), Massachusetts ($20,100) and New Jersey ($34,600). The taxpayer burden represents the funds that will be needed to pay the commitments the state has already accumulated divided by the state’s taxpayers.
“If governors and legislatures had truly balanced each state’s budget, no taxpayer’s financial burden would exist,” said Sheila Weinberg, Founder and CEO of the Institute, an organization based in Chicago, Illinois. She continued, “A state budget is not balanced if past costs, including those for employees’ retirement benefits, are pushed into the future.”
The study found that only four states (Nebraska, North Dakota, Utah and Wyoming) have assets available to pay their debt and obligations related to pension and retirees’ healthcare.
The study reviewed each state’s Comprehensive Annual Financial Report (CAFR) to offset assets against liabilities. For the first time, a detailed analysis of pension and healthcare liabilities uncovered the states’ actual obligations. From these calculations, the Institute was able to determine the Taxpayer’s Burden.
Results for each state are available at the Truth in Accounting website.
In IFTA’s analysis, Oklahoma would need $10,529,554,000 to pay its bills, based on the 2009 CAFR. This translates into a burden of $10,000 per taxpayer. The Sooner State’s position appears to have improved due to significant pension reform legislation in the 2011 legislation session. Those changes in law shifted the state’s unfunded liabilities by several billion dollars, state leaders estimate.
House Speaker Kris Steele and Shawnee and state Rep. Randy McDaniel of Oklahoma City are focused on further pension reforms, and plan to outline the next (and more challenging) goals for policy changes this week. Sen. Mike Mazzei of Tulsa, who led this year’s pension reform efforts in the Senate, has described pension reform as the most significant fiscal issue facing Oklahoma.
State Treasurer Ken Miller and Auditor & Inspector Gary Jones have also pressed for further pension reforms.
Employee compensation packages include retirement benefits. A portion of these benefits is earned each period and should be included in the current budget as a portion of current employee compensation costs. Instead most states handle many of benefits on a “pay-as-you-go” basis. This obligates future taxpayers to cover these past costs – without receiving any benefits or services.
“Though 49 of the 50 states have constitutional or legal requirements to balance budgets, most states employ a variety of financial maneuvers to circumvent this requirement,” said Roger Nelson, chair of IFTA and former vice chair of Ernst & Young. “The largest of these maneuvers is related to employee compensation.”
The Institute for Truth in Accounting (IFTA) 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.