Drum roll, please. It is time for my Second Annual Update on State Comprehensive Annual Financial Reports (CAFRs). The main data are in the first two charts below.
The big takeaways:
- California is still in the bottom 10 of the 50 states. Nevertheless, the Golden State moved up one position to 41st place from 42nd in its Unrestricted Net Position (UNP), the most accurate number for judging a state’s fiscal solvency. You can find the UNP in the Basic Financial Statements around page 30 in each CAFR, in the Statement of Net Position. In this piece I will be reporting mostly on Unrestricted Net Deficits (UNDs).
For that move, California can thank Delaware (which dropped four positions) and Vermont (which dropped three positions). Conversely, Rhode Island moved up three rankings to 40th place, just better than California.
Subsequently, our state is moving up while standing still because its UND got worse by $1,106 per resident. We went from a per capital deficit of $4,287 to $5,393. That’s more than a 25 percent increase!
In contrast, more than half the states have an overall per capita lower than the one-year increase California just incurred.
The Golden State’s total UND is even more dramatic, rising $44 billion, from $169.5 billion to $213.3 billion.
- Considering UNP rankings, New Jersey and Illinois bumped California out of the worst position even though they contain smaller populations. Illinois’ -$217.4 billion and New Jersey’s -$214.1 billion edged out California’s -$213.3 billion. The populations of those states are 12.7 million for Illinois and 8.9 million for New Jersey – about a quarter of California’s almost 40 million.
- The increase to the overall combined net deficit of all 50 states is $336 billion! That’s a dramatic increase of 38 percent, thanks mostly to adding the Other Post-Employment Benefits (OPEBs) to the balance sheets. OPEBs include such benefits as deferred compensation and, by far the largest, retiree medical care.
- The state of North Carolina’s total liabilities rose by more than $6 billion, moving the state down 24 positions.
- Such preeminent “no personal income tax” states as Texas, Florida and Nevada made significant drops in the rankings, by 17, six and five positions, respectively. Does that portend future impositions of an income tax?
- The state of Montana continued its rise, up 10 positions.
- The top 12 states remained in that top percentile.
- Combining the four states with the largest UNDs – New Jersey, Illinois, California and Texas – totals $749.4 billion. That’s 62 percent of the sum of the UNPs for all 50 states. Yet their combined populations comprise just 27 percent of America’s 330 million people.
This shows up more clearly in a bonus third chart. It shows the Unrestricted Net Positions, in order from largest to smallest, for June 30, 2018 and June 30, 2017. Here are some observations on the changes between those dates:
The fiscal year ended June 30, 2018 is much different from the previous fiscal year. For the first time, the Government Accounting Standards Board (GASB) required that Other Post-Employment Benefits (OPEBs), such as unfunded retiree medical, be reported in the liability section of the balance sheets.
Consequently, I decided to wait until all of the CAFRs were issued. However, the state of Illinois still has not released its CAFR for the year ended June 30, 2018. I’m tired of waiting.
It’s nearly September, some 14 months after the end of the 2017-18 fiscal year. So I will project what the CAFR for Illinois may look like. The results are so astonishing, it may be the reason the Land of Lincoln is holding back its release.
In order to estimate the UNP, I started with the state’s June 30, 2017 Unrestricted Net Deficit. Then I added the published amount for this state’s unfunded retiree medical, $72.6 billion, and reduced it by the $16.5 billion of OPEBs reported on last year’s CAFR. This is how I came to the estimated Unrestricted Net Deficit of $217.3 billion. Admittedly, this may be a conservative estimate.
The long-term neglect by GASB of not requiring the reporting of unfunded promises has caused this disclosure to have a massive impact on the balance sheets of many municipalities. This year’s audited financial statements prove it.
Future generations will face heavy financial burdens, and it behooves current local elected leaders and state legislators to begin the difficult task of addressing these liabilities as quickly as possible. Because the next recession will be even more difficult on state budgets than downturns in previous years.
Chart 1: June 30, 2017 Rankings
| Rank | State | Population | UNP | Per Capita | |
| 1 | Alaska | 739,795 | $14,558,125,000 | $19,679 | |
| 2 | North Dakota | 755,393 | $5,989,501,438 | $7,929 | |
| 3 | Wyoming | 579,315 | $4,518,975,575 | $7,801 | |
| 4 | Idaho | 1,716,943 | $1,146,468,000 | $668 | |
| 5 | Tennessee | 6,715,984 | $2,736,079,000 | $407 | |
| 6 | Oklahoma | 3,930,864 | $1,484,206,000 | $378 | |
| 7 | South Dakota | 869,666 | $267,296,000 | $307 | |
| 8 | Nebraska | 1,920,076 | $550,525,000 | $287 | |
| 9 | Utah | 3,101,833 | $819,880,000 | $264 | |
| 10 | North Carolina | 10,273,419 | $1,822,821,000 | $177 | |
| 11 | Iowa | 3,145,711 | ($999,603,000) | ($318) | |
| 12 | Washington | 7,405,743 | ($3,376,575,000) | ($456) | |
| 13 | Georgia | 10,429,379 | ($5,210,957,000) | ($500) | |
| 14 | Nevada | 2,998,039 | ($1,580,030,000) | ($527) | |
| 15 | Florida | 20,984,400 | ($12,401,193,000) | ($591) | |
| 16 | Oregon | 4,142,776 | ($2,482,259,000) | ($599) | |
| 17 | Virginia | 8,470,020 | ($5,344,284,000) | ($631) | |
| 18 | South Carolina | 5,024,369 | ($3,497,642,000) | ($696) | |
| 19 | Arkansas | 3,004,279 | ($2,160,882,000) | ($719) | |
| 20 | Arizona | 7,016,270 | ($5,341,848,000) | ($761) | |
| 21 | Indiana | 6,666,818 | ($5,319,406,000) | ($798) | |
| 22 | Texas | 28,304,596 | ($25,170,339,000) | ($889) | |
| 23 | Minnesota | 5,576,606 | ($5,029,153,000) | ($902) | |
| 24 | Ohio | 11,658,609 | ($10,571,925,000) | ($907) | |
| 25 | Montana | 1,050,493 | ($971,795,000) | ($925) | |
| 26 | Missouri | 6,113,532 | ($5,787,207,000) | ($947) | |
| 27 | Michigan | 9,962,311 | ($9,848,197,000) | ($989) | |
| 28 | Kansas | 2,913,123 | ($3,205,914,000) | ($1,101) | |
| 29 | New Hampshire | 1,342,795 | ($1,683,141,000) | ($1,253) | |
| 30 | Maine | 1,335,907 | ($1,885,023,000) | ($1,411) | |
| 31 | Wisconsin | 5,795,483 | ($8,361,432,000) | ($1,443) | |
| 32 | Colorado | 5,607,154 | ($8,359,538,000) | ($1,491) | |
| 33 | New Mexico | 2,088,070 | ($3,311,311,000) | ($1,586) | |
| 34 | Pennsylvania | 12,805,537 | ($21,275,848,000) | ($1,661) | |
| 35 | Alabama | 4,874,747 | ($8,608,527,000) | ($1,766) | |
| 36 | Mississippi | 2,984,100 | ($6,058,425,000) | ($2,030) | |
| 37 | New York | 19,849,399 | ($45,599,000,000) | ($2,297) | |
| 38 | West Virginia | 1,815,857 | ($4,455,964,000) | ($2,454) | |
| 39 | Louisiana | 4,684,333 | ($11,949,852,000) | ($2,551) | |
| 40 | Vermont | 623,657 | ($2,263,168,022) | ($3,629) | |
| 41 | Delaware | 961,939 | ($3,622,572,000) | ($3,766) | |
| 42 | California | 39,536,653 | ($169,499,683,000) | ($4,287) | |
| 43 | Rhode Island | 1,059,639 | ($4,581,514,000) | ($4,324) | |
| 44 | Maryland | 6,052,177 | ($27,010,946,000) | ($4,463) | |
| 45 | Hawaii | 1,427,538 | ($7,996,567,000) | ($5,602) | |
| 46 | Kentucky | 4,454,189 | ($40,157,358,000) | ($9,016) | |
| 47 | Massachusetts | 6,859,819 | ($63,992,915,000) | ($9,329) | |
| 48 | Illinois | 12,802,023 | ($161,239,415,000) | ($12,595) | |
| 49 | Connecticut | 3,588,184 | ($52,826,131,000) | ($14,722) | |
| 50 | New Jersey | 9,005,644 | ($148,863,714,435) | ($16,530) | |
| Chart 2: June 30, 2018 Rankings – Illinois Projected | ||||||
| Rank | State | Population | 2018 UNP | Per Cap | Change | |
| 1 | Alaska | 737,438 | $17,387,310,000 | $23,578 | 0 | |
| 2 | North Dakota | 760,077 | $7,172,275,944 | $9,436 | 0 | |
| 3 | Wyoming | 577,737 | $4,237,698,833 | $7,335 | 0 | |
| 4 | Idaho | 1,754,208 | $1,256,840,000 | $716 | 0 | |
| 5 | Oklahoma | 3,943,079 | $1,853,248,000 | $470 | 1 | |
| 6 | Tennessee | 6,770,010 | $2,704,085,000 | $399 | -1 | |
| 7 | Utah | 3,161,105 | $1,249,827,000 | $395 | 2 | |
| 8 | South Dakota | 882,235 | $283,343,000 | $321 | -1 | |
| 9 | Nebraska | 1,929,268 | $503,722,000 | $261 | -1 | |
| 10 | Iowa | 3,156,145 | ($1,013,268,000) | ($321) | 1 | |
| 11 | Washington | 7,535,591 | ($4,163,206,000) | ($552) | 1 | |
| 12 | North Carolina | 10,383,620 | ($5,884,784,000) | ($567) | -2 | |
| 13 | Oregon | 4,190,713 | ($2,466,140,000) | ($588) | 3 | |
| 14 | Virginia | 8,517,685 | ($5,115,028,000) | ($601) | 3 | |
| 15 | Montana | 1,062,305 | ($642,952,000) | ($605) | 10 | |
| 16 | South Carolina | 5,084,127 | ($3,578,770,000) | ($704) | 2 | |
| 17 | Indiana | 6,691,878 | ($5,062,064,000) | ($756) | 4 | |
| 18 | Arizona | 7,171,646 | ($5,522,793,000) | ($770) | 2 | |
| 19 | Nevada | 3,034,392 | ($2,448,744,000) | ($807) | -5 | |
| 20 | Georgia | 10,519,475 | ($8,506,350,000) | ($809) | -7 | |
| 21 | Florida | 21,299,325 | ($17,686,725,000) | ($830) | -6 | |
| 22 | Kansas | 2,911,505 | ($2,617,412,000) | ($899) | 6 | |
| 23 | Minnesota | 5,611,179 | ($5,629,152,000) | ($1,003) | 0 | |
| 24 | Arkansas | 3,013,825 | ($3,115,348,000) | ($1,034) | -5 | |
| 25 | Ohio | 11,689,442 | ($12,787,140,000) | ($1,094) | -1 | |
| 26 | Colorado | 5,695,564 | ($7,251,155,000) | ($1,273) | 6 | |
| 27 | Missouri | 6,126,452 | ($7,922,530,000) | ($1,293) | -1 | |
| 28 | Wisconsin | 5,813,568 | ($8,542,138,000) | ($1,469) | 3 | |
| 29 | Michigan | 9,995,915 | ($14,946,883,000) | ($1,495) | -2 | |
| 30 | Mississippi | 2,986,530 | ($5,845,872,000) | ($1,957) | 6 | |
| 31 | Alabama | 4,887,871 | ($9,597,426,000) | ($1,964) | 4 | |
| 32 | New Mexico | 2,095,428 | ($4,690,920,000) | ($2,239) | 1 | |
| 33 | West Virginia | 1,805,832 | ($4,119,293,000) | ($2,281) | 5 | |
| 34 | New York | 19,542,209 | ($45,231,000,000) | ($2,315) | 3 | |
| 35 | New Hampshire | 1,356,458 | ($3,221,260,000) | ($2,375) | -6 | |
| 36 | Maine | 1,338,404 | ($3,491,939,000) | ($2,609) | -6 | |
| 37 | Pennsylvania | 12,807,060 | ($42,892,246,000) | ($3,349) | -3 | |
| 38 | Louisiana | 4,659,978 | ($16,052,435,000) | ($3,445) | 1 | |
| 39 | Texas | 28,701,845 | ($104,638,813,000) | ($3,646) | -17 | |
| 40 | Rhode Island | 1,057,315 | ($4,702,373,000) | ($4,447) | 3 | |
| 41 | California | 39,557,045 | ($213,316,033,000) | ($5,393) | 1 | |
| 42 | Maryland | 6,042,718 | ($34,404,356,000) | ($5,694) | 2 | |
| 43 | Vermont | 626,299 | ($3,831,618,339) | ($6,118) | -3 | |
| 44 | Hawaii | 1,420,491 | ($11,381,725,000) | ($8,013) | 1 | |
| 45 | Delaware | 967,171 | ($8,475,290,000) | ($8,763) | -4 | |
| 46 | Kentucky | 4,468,402 | ($42,257,250,000) | ($9,457) | 0 | |
| 47 | Massachusetts | 6,902,149 | ($74,254,002,000) | ($10,758) | 0 | |
| 48 | Illinois | 12,741,080 | ($217,354,522,000) | ($17,059) | 0 | |
| 49 | Connecticut | 3,572,665 | ($61,949,017,000) | ($17,340) | 0 | |
| 50 | New Jersey | 8,908,520 | ($214,093,149,142) | ($24,032) | 0 | |
Chart 3: Unrestricted Net Positions – June 30, 2018 vs 2017 |
| Rank | State | 2018 UNP | State | 2017 UNP | Change | ||
| 1 | Alaska | $17,387,310,000 | Alaska | $14,558,125,000 | 0 | ||
| 2 | North Dakota | $7,172,275,944 | North Dakota | $5,989,501,438 | 0 | ||
| 3 | Wyoming | $4,237,698,833 | Wyoming | $4,518,975,575 | 0 | ||
| 4 | Tennessee | $2,704,085,000 | Tennessee | $2,736,079,000 | 0 | ||
| 5 | Oklahoma | $1,853,248,000 | North Carolina | $1,822,821,000 | -24 | ||
| 6 | Idaho | $1,256,840,000 | Oklahoma | $1,484,206,000 | 1 | ||
| 7 | Utah | $1,249,827,000 | Idaho | $1,146,468,000 | 1 | ||
| 8 | Nebraska | $503,722,000 | Utah | $819,880,000 | 1 | ||
| 9 | South Dakota | $283,343,000 | Nebraska | $550,525,000 | 1 | ||
| 10 | Montana | ($642,952,000) | South Dakota | $267,296,000 | 1 | ||
| 11 | Iowa | ($1,013,268,000) | Montana | ($971,795,000) | 1 | ||
| 12 | Nevada | ($2,448,744,000) | Iowa | ($999,603,000) | 1 | ||
| 13 | Oregon | ($2,466,140,000) | Nevada | ($1,580,030,000) | 1 | ||
| 14 | Kansas | ($2,617,412,000) | New Hampshire | ($1,683,141,000) | -2 | ||
| 15 | Arkansas | ($3,115,348,000) | Maine | ($1,885,023,000) | -2 | ||
| 16 | New Hampshire | ($3,221,260,000) | Arkansas | ($2,160,882,000) | 1 | ||
| 17 | Maine | ($3,491,939,000) | Vermont | ($2,263,168,022) | -2 | ||
| 18 | South Carolina | ($3,578,770,000) | Oregon | ($2,482,259,000) | 5 | ||
| 19 | Vermont | ($3,831,618,339) | Kansas | ($3,205,914,000) | 5 | ||
| 20 | West Virginia | ($4,119,293,000) | New Mexico | ($3,311,311,000) | -2 | ||
| 21 | Washington | ($4,163,206,000) | Washington | ($3,376,575,000) | 0 | ||
| 22 | New Mexico | ($4,690,920,000) | South Carolina | ($3,497,642,000) | 4 | ||
| 23 | Rhode Island | ($4,702,373,000) | Delaware | ($3,622,572,000) | -9 | ||
| 24 | Indiana | ($5,062,064,000) | West Virginia | ($4,455,964,000) | 4 | ||
| 25 | Virginia | ($5,115,028,000) | Rhode Island | ($4,581,514,000) | 2 | ||
| 26 | Arizona | ($5,522,793,000) | Minnesota | ($5,029,153,000) | -1 | ||
| 27 | Minnesota | ($5,629,152,000) | Georgia | ($5,210,957,000) | -6 | ||
| 28 | Mississippi | ($5,845,872,000) | Indiana | ($5,319,406,000) | 4 | ||
| 29 | North Carolina | ($5,884,784,000) | Arizona | ($5,341,848,000) | 3 | ||
| 30 | Colorado | ($7,251,155,000) | Virginia | ($5,344,284,000) | 5 | ||
| 31 | Missouri | ($7,922,530,000) | Missouri | ($5,787,207,000) | 0 | ||
| 32 | Delaware | ($8,475,290,000) | Mississippi | ($6,058,425,000) | 4 | ||
| 33 | Georgia | ($8,506,350,000) | Hawaii | ($7,996,567,000) | -3 | ||
| 34 | Wisconsin | ($8,542,138,000) | Colorado | ($8,359,538,000) | 4 | ||
| 35 | Alabama | ($9,597,426,000) | Wisconsin | ($8,361,432,000) | 1 | ||
| 36 | Hawaii | ($11,381,725,000) | Alabama | ($8,608,527,000) | 1 | ||
| 37 | Ohio | ($12,787,140,000) | Michigan | ($9,848,197,000) | -1 | ||
| 38 | Michigan | ($14,946,883,000) | Ohio | ($10,571,925,000) | 1 | ||
| 39 | Louisiana | ($16,052,435,000) | Louisiana | ($11,949,852,000) | 0 | ||
| 40 | Florida | ($17,686,725,000) | Florida | ($12,401,193,000) | 0 | ||
| 41 | Maryland | ($34,404,356,000) | Pennsylvania | ($21,275,848,000) | -2 | ||
| 42 | Kentucky | ($42,257,250,000) | Texas | ($25,170,339,000) | -5 | ||
| 43 | Pennsylvania | ($42,892,246,000) | Maryland | ($27,010,946,000) | 2 | ||
| 44 | New York | ($45,231,000,000) | Kentucky | ($40,157,358,000) | 2 | ||
| 45 | Connecticut | ($61,949,017,000) | New York | ($45,599,000,000) | 1 | ||
| 46 | Massachusetts | ($74,254,002,000) | Connecticut | ($52,826,131,000) | 1 | ||
| 47 | Texas | ($104,638,813,000) | Massachusetts | ($63,992,915,000) | 1 | ||
| 48 | California | ($213,316,033,000) | New Jersey | ($148,863,714,435) | -1 | ||
| 49 | New Jersey | ($214,093,149,142) | Illinois | ($161,239,415,000) | -1 | ||
| 50 | Illinois | ($217,354,522,000) | California | ($169,499,683,000) | 2 | ||
| Totals | ($1,214,054,771,704) | ($878,007,376,444) | |||||