(The Center Square) – A year ago, when Truth in Accounting published its annual Financial State of the States report, it noted that New York entered the COVID-19 pandemic in “poor fiscal health.”
“And it will probably come out of the crisis even worse,” the think tank added.
Fast forward to this year, and while the pandemic still lingers, Truth in Accounting’s latest report, released Tuesday, showed its prediction was correct.
In its 12th annual edition of the report, the think tank that focuses on public finances gave one of its 10 failing grades to New York as it found the state had a tax burden of $132.7 billion, or $20,100 per taxpayer.
Any state with a burden exceeding $20,000 gets an “F.” While New York also ranked 41st in the country in last year’s State of the State, it received a “D” because its taxpayer burden was $17,200.
The analysis is based on a review of New York’s fiscal year 2020 audited financial report. Truth in Accounting noted that the state’s financial position took a $14.5 billion hit from the previous fiscal year, thanks mainly to an $11 billion loss in the State and Local Employees’ Retirement Plan.
Like many states, New York failed to have enough money to meet its commitments during the COVID-19 pandemic, the report notes. Then-Gov. Andrew Cuomo often cited the projected budget deficits the state faced during his regular briefings throughout the pandemic. With key segments of New York City’s economy shut down for months and workers fleeing to the suburbs or beyond, the state found itself looking at a shortfall totaling several billions of dollars.
“The majority of states were financially unprepared for any crisis,” said Sheila Weinberg, founder and CEO of Truth in Accounting in a statement. “When states can’t pay their bills, taxpayers are on the hook.”
New York received billions in COVID-19 aid, including more than $12.7 billion in direct funding from the American Rescue Plan Act. While that and other funding certainly helped, the state’s finances regarding retiree benefits stood out as a major red flag.
All but $15 billion of the state’s shortfall is tied to unfunded pension benefits ($24 billion) and unfunded retiree health insurance benefits ($93.7 billion).
“The state had only set aside 84 cents for every dollar of promised pension benefits and 2 cents for every dollar of promised retiree health care benefits,” the report stated.
In the 2020 annual report, New York State Comptroller Thomas DiNapoli noted the impact those benefits had on state finances.
“New York State’s net position … remained negative this year, primarily due to the recognition of other post-employment benefits (OPEB) on the balance sheet,” the comptroller wrote in the Sept. 1, 2020 report. “These liabilities, which totaled $66 billion as of SFY 2019-20, are primarily related to future retiree health care costs.”
New York is not alone when facing challenges regarding paying for retiree benefits. The Truth in Accounting report found that, on average, the states saved just 64 cents per pension dollar and only 8 cents on each health insurance dollar.
While still given a failing grade, New York’s financial position looked stronger than several of its neighbors. Of the states it borders, only Pennsylvania had a lower taxpayer burden, $18,300. Vermont’s burden was listed at $24,700 per taxpayer.
Three of New York’s neighbors ranked among the four worst states in the country. Massachusetts came in fourth-worst at $38,100 per taxpayer. New Jersey’s taxpayer burden of $58,300 was second-to-last, with Connecticut at the bottom thanks to its $62,500 burden for each taxpayer.
Only 11 states finished the year with a taxpayer surplus, meaning the state had enough funding to meet all of its commitments. Alaska led the way with a surplus of $55,100 per taxpayer.