Report gives state F grade for financial condition

 

DOVER — A new report from a group that focuses on states’ fiscal health gives Delaware an F, claiming the state had an $8.5 billion gap between assets and liabilities in 2016.

The analysis from Truth in Accounting, a nonprofit dedicated to state budgeting, says every Delaware taxpayer had a burden of $26,300, a sum exceeded by only six states.

Although Delaware law requires the General Assembly to balance the budget every year, Truth in Accounting says that can be misleading.

“The most common accounting trick states use is hiding a large portion of employee compensation off the balance sheet and budget. Employee compensation packages include benefits such as health care, life insurance, and pensions,” the analysis notes. “States become obligated to pay these benefits as employees earn them.

“Although these retirement benefits will not be paid until the employees retire, they still represent current compensation costs because they were earned and incurred throughout the employees’ tenure. Furthermore, that money needs to be put into the pension fund in order to accumulate investment earnings. If states didn’t offer pensions and other benefits, they would have to compensate their employees with higher salaries from which they would fund their own retirement.”

According to the group, the burden shared by Delawareans rose by $6,600 per person from 2015 to 2016. Delaware has been in the bottom top 10 among states by Truth in Accounting’s metrics since at least 2013.

The most recent report indicates Delaware had assets of $2.9 billion and liabilities of $11.4 billion, with most of its bills coming from pension benefits and retiree health care.

That’s far from unique to the First State, Truth in Accounting says.

“States in general do not have enough money to pay their bills,” the findings note. “Based on our analysis, the total state debt nationwide amounts to $1.5 trillion in unfunded debt. Most of this debt comes from unfunded retiree benefit promises, such as pension and retiree health care debt. This year, pension debt accounts for $832.6 billion, and retiree health care debt amounted to $614.9 billion.”

The report recommends decision-makers avoid punting on issues, something for which the Delaware General Assembly has been criticized, both by members and nonmembers, in recent years.

“States should be responsible in both funding and reporting by including these promised benefits in the budget and funding them in the years employees earn them,” Truth in Accounting says. “Unfortunately, some elected officials have instead chosen to use some of the money that is owed to pension funds to keep taxes low, and pay for politically popular programs. This is like charging earned benefits to a credit card without having the money to pay off the debt.

“Instead of funding promised benefits now, they have been charged to future taxpayers. Shifting the payment of employee benefits onto future taxpayers allows the budget to appear balanced, while state debt is increasing.”

A spokesman for Democratic Gov. John Carney said in an email the governor will continue working toward “a balanced, long-term plan that addresses the state’s financial challenges, and allows us to make necessary investments in education, economic development, public safety and environmental protection.”

Reach staff writer Matt Bittle at mbittle@newszap.com

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