Texas state finances worsened for the fiscal year ending Aug. 31, 2020 despite CARES Act federal funding, according to a new study issued by a nonprofit, nonpartisan financial think tank which ranks all 50 states by their financial health every year.
“If the citizens knew that state officials haven’t been balancing the budget, would they continue to reelect the same people,” said Sheila Weinberg, founder and CEO of Truth in Accounting. “Look at the data and if the data’s showing that they really aren’t balancing their budget, should you reelect people who aren’t balancing their budgets? The governor and the legislators make budgeting decisions so the fault is probably spread around.”
Texas ranked 33rd in the 12th Annual Financial State of the States Truth in Accounting report and received a D grade compared to Alaska, which ranked first with an A grade, North Dakota ranking second and Wyoming ranking third.
“The states that are doing good don’t have large pension and retiree healthcare plans,” Weinberg told Dallas Express. “They do not offer their employees those large benefits. They keep those to a minimum. Alaska has a permanent fund where they get a lot of money from the federal government and other sources for their natural resources, like oil and lumber. In the past, they have set a large part of that money aside and get a lot of investment income from that money that they’ve set aside.”
The report found that Texas needed $13,100 from every state taxpayer to get out of debt compared to the state of Utah, which ranked 4th and had a surplus of $6,500 per tax payer. The state of Alaska had a surplus of $55,100 per taxpayer.
“It’s related to Texas pension plans and the employee retirement plan, which is expected to run out of assets by 2044 for current workers,” Weinberg said. “When the pension plans run out of assets, the actuaries assume that once that happens, then the state’s going to have to borrow money to fund those.”
The TIA study further found that the state’s overall financial condition worsened by almost $11 billion during the onset of the pandemic mostly due to an increase in liabilities.
“The first for Texas is to truly balance their budget,” Weinberg said. “They should be fully funding their pension contributions. They should be fully funding their retiree healthcare contributions and to fix this, they either need to bring additional revenues in or cut spending or figure out somehow to reduce their unfunded pension and retiree healthcare promises.”
Lower-than-expected investment income for the state’s retirement plans also contributed to the state’s financial decline.
“They were expecting to earn interest of 7% but because the market was bad as of Aug. 31, 2020, Texas earned less than that amount because of the pandemic shut downs,” Weinberg added.
Connecticut was the worst performing state. It ranked 50th with a taxpayer burden of $62,500. Total debt among the 50 states overall amounted to $1.5 trillion, according to the report.
“Texas just got into the pension and retiree healthcare plans and pushed those costs into the future for future taxpayers instead of paying them as those were accumulating,” Weinberg said.