Fiscal Watchdog Ranks Louisiana 43rd in Nation for Indebtedness
Truth in Accounting: Louisiana’s state financial burden even worse than California’s
NEW ORLEANS, La. – The Institute for Truth in Accounting’s state ranking for assets relative to liabilities, released this week, finds Louisiana to be the second most indebted state in the South.
Despite a balanced budget requirement, Louisiana has still managed to acquire $21 billion more in liabilities than it has assets to offset them. That equates to $16,800 per taxpayer, even worse than California’s $15,100. In the South, only Kentucky surpasses Louisiana with $23,800 per taxpayer.
Four states—Wyoming, North Dakota, Nebraska, and Utah—lead the way with assets greater than their liabilities. At $15,100 per taxpayer, Wyoming has the highest positive balance.
Connecticut and New Jersey are far below the rest with their financial burden at $41,200 and $34,600 respectively. Illinois, Hawaii, and Kentucky round out the bottom five.
The taxpayer burden represents the funds that would be needed to pay the commitments the state has already accumulated divided by the state’s taxpayers, and it includes pension and retiree health care obligations.
“If governors and legislatures had truly balanced each state’s budget, no taxpayer’s financial burden would exist,” says Sheila Weinberg, Founder and CEO of the Institute. She continued, “A state budget is not balanced if past costs, including those for employees’ retirement benefits, are pushed into the future.” (Listen to an interview with Sheila Weinberg – 17 minutes.)
[audio:http://bit.ly/mtxEoI] Download the MP3.
Paul Rainwater, commissioner of administration, has countered that Louisiana complies with “Generally Accepted Accounting Principles (GAAP) as prescribed by the Government Accounting Standards Board (GASB) [a non-governmental organization] and the Louisiana Revised Statutes.”
IFTA reviewed each state’s Comprehensive Annual Financial Report and used the data to go beyond the GAAP, which they infer to be misleading “political math.”
“Most states employ a variety of financial maneuvers to circumvent [the balanced budget] requirement,” says Roger Nelson, chair of IFTA and former vice chair of Ernst & Young. “The largest of these maneuvers is related to employee compensation.”
They highlight employee compensation packages because they include retirement benefits which often go unaccounted for. Since a portion of these benefits accrues each period, they assert it should be included in the current budget as normal wages are—rather than on a “pay-as-you-go” basis.
“This obligates future taxpayers to cover these past costs – without receiving any benefits or services.”
Fergus Hodgson is the capitol bureau reporter with the Pelican Institute for Public Policy and editor of The Pelican Post. He can be contacted at email@example.com, and one can follow him on twitter.