By Sheila Weinberg
A recent report from financial think tank Truth in Accounting has given New York’s finances a failing grade. The report is based on the state’s comprehensive financial report, which Comptroller Thomas DiNapoli presented as a “signal that the state has moved beyond the recurring fiscal gridlock of recent decades.” However, the report is full of red flags for taxpayers.
Consider $132.5 billion – that is the total amount of bills that New York has accumulated to date, and when divided across the state tax base, it works out to an individual taxpayer burden of $20,500. To put things in perspective for the average New York State resident, the Buffalo median household income is $31,000.
New York has slid further into the red over recent years as it struggled to align tax revenue with expenditures during the economic recovery. The taxpayer burden has almost doubled over the intervening period, increasing from $13,700 in 2009 to the current $20,500 level.
Last year, New York’s taxpayer burden was $20,100, and was the eighth highest taxpayer burden among all 50 states. But Gov. Andrew Cuomo is constitutionally required to submit a balanced budget and the State Legislature is required by statute to pass a balanced budget.
So how and why is there a taxpayer burden to begin with?
The bulk of the problem in New York comes from unfunded retiree health care plans, which total $100.6 billion. These are benefits that New York has promised to pay state employees but left virtually unfunded. Rather than funding these benefits as they are earned, the state has a pay-as-you-go system in which it only funds current payments.
New York’s debt is alarming, but the situation is compounded by the Office of the Comptroller’s lax transparency standards. As a result, much of New York’s debt load is obscured from official ledgers.
State officials are concealing $69.2 billion in obligations using accounting gimmicks that would land them in prison if they worked for a private-sector organization.
An example of these gimmicks are retiree health care benefits that state employees have earned through years of service but that New York State does not count in “official” debt figures. New York employs the questionable logic that the state only needs to pay the checks that are in the mail at this very moment. No doubt New York State S1 employees hold a different view of their promised benefits.
Conversations about finances are rarely pleasant or simple, but they are critically important to understanding how taxpayer money is spent.
Ignoring the problem, especially when it comes to pensions and other benefits, will only lead to a more catastrophic outcome. And really, how much more dire does New York’s $132.5 billion problem need to be to grab your attention?
Sheila Weinberg, a certified public accountant, is the founder and chief executive officer of Chicago-based Truth in Accounting, a 501(c)(3) non-profit organization.