Pennsylvania Finances Receive a Grade of “D”

According to a new report by Truth in Accounting (TIA), Pennsylvania continues to be a sinkhole state without enough assets to cover its debt. Repeated decisions by state officials have left the commonwealth of Pennsylvania with a staggering debt burden of $72.4 billion, according to Truth in Accounting's analysis of Pennsylvania’s recent financial filings for 2016. That burden equates to $16,800 for every Pennsylvania taxpayer, which is $1,300 worse than it was for 2015.

These statistics are troubling, but what's more troubling is that state government officials continue to obscure large amounts of retirement debt on their balance sheets, despite new rules to increase financial transparency. This skewed financial data gives state residents a false impression of their state's overall financial health.

Truth in Accounting is a Chicago-based nonprofit think tank that analyzes state financial reports when they are published. According to its report for 2016, Pennsylvania only has $39 billion of assets available to pay bills totaling $111.4 billion. This means that the commonwealth has a $72.4 billion shortfall and a $16,800 taxpayer burden which is each taxpayer's share of state bills after its available assets have been tapped. TIA's Taxpayer Burden™ measurement incorporates both assets and liabilities, not just pension debt.

Because of an accounting rule implemented last year, Pennsylvania had to report its pension debt on its balance sheet. This year, the commonwealth's reported pension debt grew from $14 billion in 2015 to $17.1 billion in 2016. Despite reporting more of its pension debt, the commonwealth is still hiding much retiree health care debt. Furthermore, the commonwealth excludes most liabilities relating to the Public School Employees’ Retirement System. Our analysis includes much of the debt generated by this pension plan. Pennsylvania's total hidden debt amounts to $42.7 billion. A new accounting standard will be implemented in two years, and will require states to report their retiree health care debt on the balance sheet.

The bottom line is that Pennsylvania would need nearly $17,000 from each of its taxpayers to pay all of its bills, so it received a grade of “D” for its finances.

Here is how Pennsylvania compares to New York, Ohio and Virginia: http://www.statedatalab.org/c/3hJ2DWFYfb7de6c
Click on the link to go to an interactive chart at Truth in Accounting’s State Data Lab.