Most States Drowning in Debt

40 states lack funds to pay bills

Image Credits: Duane Prokop / Stringer / Getty.

The federal government continues to pile up debt at a staggering rate. In August alone, the US government added $450 billion to the national debt.

But Uncle Sam isn’t the only one who doesn’t have enough money to pay his bills. Forty state governments are also drowning in red ink.

Total state government debt now stands at $1.49 trillion with 40 states lacking sufficient funds to pay their bills according to Truth in Accounting’s (TIA) Financial State of the States report.

“At the end of the fiscal year (FY) 2018, 40 states did not have enough money to pay all of their bills. This means that to balance the budget – as is supposedly required by law in 49 states – elected officials have not included the true costs of the government in their budget calculations and have pushed costs onto future taxpayers.”

Unfunded pension liabilities are the primary factor driving the pileup of state debt. According to the report, “One of the ways states make their budgets look balanced is by shortchanging public pension and OPEB (other post-employment benefit) funds. This practice has resulted in an $824 billion shortfall in pension funds and a $664.6 billion shortfall in OPEB funds.”

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TIA Founder and CEO Sheila Weinberg said for many states, there is no easy way out of their fiscal mess.

“Many of these state governments have no hope of achieving a budget recovery barring significant program cuts or tax hikes.”

In simple terms, if you’re depending on a fat government pension to fund your retirement dreams, your golden years could turn into a nightmare. As we’ve reported, you should probably shouldn’t assume any government pension will ever be paid.

The report ranks the states based on surplus/debt per taxpayer. The numbers represent “each taxpayer’s share of state bills after available assets have been tapped. ”

The following 10 states have budget surpluses. TIA calls these “Sunshine States.”

  1. Alaska, $74,200 per taxpayer
  2. North Dakota, $30,700
  3. Wyoming, $20,800
  4. Utah, $5,300
  5. Idaho, $2,900
  6. Tennessee, $2,800
  7. South Dakota, $2,800
  8. Nebraska, $2,000
  9. Oregon, $1,600
  10. Iowa, $700

Taxpayers in every other state are in the red. TIA calls these “Sinkhole States.”

  1. Minnesota, -$200
  2. Virginia, -$1,200
  3. Oklahoma, -$1,200
  4. North Carolina, -$1,300
  5. Indiana, -$1,700
  6. Florida, -$1,800
  7. Montana, -$2,100
  8. Arkansas, -$2,300
  9. Arizona, -$2,500
  10. Nevada, -$3,100
  11. Wisconsin, -$3,200
  12. Georgia, -$3,500
  13. Missouri, -$4,300
  14. New Hampshire, -$5,000
  15. Ohio, -$6,600
  16. Kansas, -$7,000
  17. Colorado, -$7,200
  18. Washington, -$7,400
  19. Maine, -$7,400
  20. West Virginia, -$8,300
  21. Mississippi, -$10,000
  22. Alabama, -$12,000
  23. Texas, -$12,100
  24. New Mexico, -$13,300
  25. Rhode Island, -$13,900
  26. South Carolina, -$14,500
  27. Maryland, -$15,500
  28. Michigan, -$17,000
  29. Pennsylvania, -$17,100
  30. Louisiana, -$17,700
  31. Vermont, -$19,000
  32. New York, -$20,500
  33. California, -$21,800
  34. Kentucky, -$25,700
  35. Delaware, -$27,100
  36. Hawaii, -$31,200
  37. Massachusetts, -$31,200
  38. Connecticut, -$51,800
  39. Illinois, -$52,600
  40. New Jersey, -$65,100

Every state in the US except Vermont has a balanced budget amendment. So, how did states rack up $1.5 trillion in debt? According to TIA, state governments use a number of accounting tricks to create the illusion of fiscal responsiblity.

  • 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.
  • Hiding a large portion of employee compensation from the budgeting process.

The TIA report highlights yet another aspect of America’s massive debt bubble that includes not only government red ink but also corporate debt and consumer debt.  extreme debt load in America today is among the underlying economic fundamentals that simply can’t be ignored.

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