In its 2019 study on state fiscal rankings, Truth in Accounting (TIA) found that Maryland’s debts outweigh its revenues by $33.5 billion — or $12,500 per taxpayer, earning it a “D” grade from the non-profit government finance watchdog group.
The analysis is part of the tenth annual State of the States (FSOS) report, a comprehensive study of the fiscal health of all 50 states based on FY 2018 comprehensive annual financial reports (CAFRs).
In the report, TIA divides the amount of money needed to pay bills (including pension and retiree healthcare costs), excluding capital debt, by the number of state taxpayers to come up with what it calls Taxpayer Burden™.
According to this methodology, debt among the states was $1.5 trillion at the end of FY 2018, and 40 states did not have enough money to pay their bills.
According to the Maryland Department of Legislative Services:
While the State’s fiscal position is positive in fiscal 2019 and 2020, the outlook is less favorable in the out-years. A cash shortfall of approximately $900 million is forecast in fiscal 2021 and is expected to grow to $1.6 billion by fiscal 2024. Absent one-time spending, the forecast of ongoing general fund revenue and spending shows a structural deficit of nearly $1.0 billion in fiscal 2021, growing to $1.5 billion by fiscal 2024.
The analysis criticizes Maryland’s reported net position, which, according to TIA, “is inflated by $2.2 billion, largely because the state defers recognizing losses incurred when the net pension liability increases.”
According to the report:
Maryland’s elected officials have made repeated financial decisions that have left the state with a debt burden of $33.5 billion. That burden equates to $15,500 for every state taxpayer. Maryland’s financial problems stem mostly from unfunded retirement obligations that have accumulated over the years. Of the $81.7 billion in retirement benefits promised, the state has not funded $20.8 billion in pension and $11.4 billion in retiree health care benefits.
Maryland and other states have become more transparent over the last few years, thanks to the Generally Accepted Accounting Principles (GAAP) set by the Governmental Accounting Standards Board (GASB), which now require governments to disclose pension (GASB 68) and other post-employment (GASB 75) benefits on their balance sheets.
Alaska, North Dakota, Wyoming, Utah, and Idaho are the states with the highest level of surplus. The states in the worst fiscal condition are New Jersey, Illinois, Connecticut, Massachusetts, and Hawaii.