Over Half Of US States Are Bleeding Cash And Going Broke
Over Half Of US States Are Bleeding Cash And Going Broke, Researchers Say — Here's Why And What It Means For You
Christy Bieber Thu, November 28, 2024 Moneywise
Across the country, states aren't doing very well with their budgets. In fact, 27 U.S. states didn't have the money to pay their bills as of the end of fiscal year 2023, according to nonpartisan think tank Truth in Accounting. Connecticut, New Jersey, Illinois and Massachusetts faced the biggest shortfalls per taxpayer.
"There are certainly tremendous challenges going forward," Oliver Giesecke, a research fellow at the Hoover Institution at Stanford University, told CNBC in a report published Nov. 4.
There are several reasons why states might be struggling, but what it means for citizens is there's a very real risk of tax hikes and cuts to public services and benefits programs.
Here's what you need to know about the financial trouble states are finding themselves in — along with how this could impact you.
Federal Aid
Some states suffer from budgeting problems that were previously masked by federal assistance during the COVID-19 pandemic, according to The Pew Charitable Trusts.
During the pandemic, the federal government significantly stepped up the money it was giving to states, totaling $800-plus billion, per the organization. This made it affordable for states to cut taxes and increase spending for a time.
"What we're seeing is largely a return to Earth from those pandemic surpluses," Justin Theal, a senior officer with The Pew Charitable Trusts, told CNBC. "A huge looming question out there is around the long-term affordability of the tax cuts and spending increases that were enacted."
The federal funds will dry up in 2026, according to the broadcaster, as much of the country is being hit by a cost-of-living crisis. Some state leaders are considering tax relief for this reason, which means some government programs could face big cuts.
State Pensions
The largest contributor to state debt at the end of fiscal year 2023 was unfunded retirement liabilities, Truth in Accounting reports. Around 86% of state and local government workers had access to a pension plan as of March 2022, according to the Bureau of Labor Statistics.
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