The Corner

States’ Real Debt Burden: $4 Trillion

The Washington Examiner’s Conn Carroll points to a new study showing that the states have accumulated $4 trillion in “debt,” when you consider their unfunded liabilities and other fiscal shortfalls.

Here is a chart that breaks the debt by states:

You won’t be surprised to find out that among the more indebted states are California, Illinois, New Jersey, New York, and Ohio. I do have to say that I was surprised to see how much in debt Texas is. Carroll writes:

California, again, led all states in total debt weighing in at $617 billion in unfunded liabilities. On a per capita basis, each Californian faces $16,386 in state debt compared to just $11,117 owed by each Texan. The top five states in total debt burden where California, New York ($300 billion), Texas ($286 billion), New Jersey ($282 billion), and New Jersey ($271 billion). The same five states led the ranking last year.

Unfunded public pension liabilities are the main drivers of state fiscal woes, accounting for $2.8 trillion of the shortfall. Other post employment benefits, including health care, account for another $627 billion in debt. California faces $398 billion in unfunded pension liabilities and alone.

The numbers provided are meant to provide a more realistic number than the one usually advertised by lawmakers, since it includes market-valued unfunded public-pension liabilities in order to provide “a realistic view of the money owed to public pension systems as a result of years of skipped payments, borrowed funds, and inaccurate discount rate assumptions.” The author of the study, Cory Eucalitto, explains:

In comparison to market-valued liabilities, traditionally calculated unfunded pension liabilities hide the true enormity of state debt obligations. Unfunded liability figures from the Pew Center on the States rely on much of the same data that states use to continually underfund their pension systems. While market-valued liabilities total $2.8 trillion, the latest traditionally calculated figures total only $760 billion in unfunded pension liabilities. Total state debt using these figures is still over $2 trillion, but a comprehensive view of state debt without accurately assessed public pension liabilities disguises the problem to the tune of as much as $2.1 trillion.

Add that number to our $11 trillion federal debt held by the public and our almost $5 trillion in intra-governmental debt, and you just might start worrying about this country’s ability to pay its bills.

Veronique de Rugy — Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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