Every Alabama taxpayer’s financial burden for the state’s debt is $14,000, according to a new analysis by Truth in Accounting, a non-profit government watchdog group. That’s the 17th highest financial burden per state taxpayer in the nation.
According to The Daily Signal, a conservative blog backed by The Heritage Foundation, “Taxpayer burden is calculated by determining each taxpayer’s share of state debt after setting aside capital-related debt and assets.”
$14,000 per state taxpayer is nothing to sneeze at, although it pales in comparison to the roughly $152,000 per taxpayer that is owed on the U.S. federal debt. But it’s also relatively small compared to the share of debt per taxpayer in many other states around the country.
Truth in Accounting refers to the state’s where debt is the greatest burden per taxpayer as “sinkhole states.” The top 5 — better yet, the bottom 5 — sinkhole states have an average taxpayer burden of $36,400. In Connecticut, where state debt per taxpayer is the highest in the country, the burden is an astounding $48,000 per taxpayer, followed by Illinois ($43k/per taxpayer), New Jersey ($36k) Massachusetts ($28k) and Hawaii ($27k).
On the flip side, states where taxpayers have the lowest debt burden are called “sunshine states.” Taxpayers in the top 5 sunshine states are actually not in debt at all, but enjoy a surplus. Alaska has a surplus of almost $47,000 per taxpayer, followed by North Dakota ($22k+), Wyoming ($20k+), Utah ($2.7k) and South Dakota ($2.7k).
So what’s the difference between sinkhole states and sunshine states? That’s complicated, of course, and there’s plenty of blame to go around. But as The Daily Signal rightly points out, the debt in many states, including Alabama, is “primarily unpaid pension and retirement health promises.”
The Retirement Systems of Alabama (RSA) is the entity that handles the public pensions for Alabama’s state employees, including the Teachers’ Retirement System, Employees’ Retirement System and Judicial Retirement Fund.
According to the RSA’s most recent Comprehensive Annual Financial Report (CAFR), those three systems are only 66.5, 65.7, and 61.6 percent funded. In other words, the State of Alabama has less than two-thirds the amount of money it needs to fulfill its obligations to retired state employees, which is why Alabama taxpayers have been propping up the RSA to the tune of about $1 billion a year.
That’s obviously not sustainable, and continues to add to each Alabamian’s share of the state’s debt year after year.
Promises made to current state employees should be kept, but in spite of the often difficult politics surrounding pension reform, momentum seems to be building in favor of change.
Free market think tanks like the Manuel H. Johnson Center for Political Economy at Troy University and the Alabama Policy Institute have made pension reform one of their top priorities in recent years. And the Alabama Legislature already moved to stabilize the RSA in 2012 at a time when estimates said it would run out of money by 2023. The plan, which was spearheaded by state senator Arthur Orr (R-Decatur) saved the state an estimated $162 million per year.
With every Alabama taxpayer’s share of the debt already at $14,000, more changes to the state’s public pensions systems are likely on their way.
Follow Cliff on Twitter @Cliff_Sims
