A recent analysis shows that the majority of America’s largest cities are insolvent, and cannot meet their obligations.
In its eighth annual Financial State of the Cities report, the right-leaning think tank Truth in Account determined that as of 2022, 53 of the country’s 75 largest cities have fewer assets than liabilities.
The report says:
To claim that their budgets were balanced as required by law, elected officials in 75 cities did not include the actual costs of the government in their calculations. The costs have been shifted to future taxpayers.
Assets worth $307.4 Billion could be used by 75 cities to pay bills. The debt of the 75 cities, including unfunded retirement benefits, was $595.3 billion.
According to the analysis, the biggest obligation large cities have is their pension obligations. These are more affordable if based on the market value of the investment.
In 2022, as the U.S. economy began to recover, cities received federal COVID-19 funding and spent it. The cities also received additional tax revenue, but these economic gains were partially offset by an increase in their pension liabilities. The decrease in the market value of their retirement investments was a major factor.
The market has experienced a dramatic shift in the past few years. This will hurt the financial position of the majority of cities by 2022. This also affects their pension investments.
Only 1 city out of 75 surveyed received an A grade for fiscal health. D is the most common grade, followed by C and B.
Did you know that at the end of FY 2024 fifty-three cities did not have enough money to pay their bills.
Was your city one of them? Let us know 👇https://t.co/OSkqPkK9q0 pic.twitter.com/XiSZhhc8Ra
— Truth in Accounting (@truthinacct) February 20, 2024
Analyzed is the burden of each city on its taxpayers. It is the amount that each taxpayer must pay to balance the budget.
Nine of the ten cities with the highest tax burdens have Democratic mayors. New York City tops the list, followed by Chicago(-$42.900), Honolulu (-$24.200), Philadelphia (-$20.400), Portland (-$20.100), New Orleans (-$18.200), Miami(-$15.500), Milwaukee(-$15.300), Baltimore(-$14.100), Pittsburgh (-$14.100).
The good news is that there were cities with surpluses of taxpayers. This meant that they could give each taxpayer a specific amount while still maintaining a balanced budget. Washington D.C. was the city that had the biggest surplus.
NEW RELEASE ALERT 🚨🚨
We have officially released our Financial State of the Cities report❗
At the end of the fiscal year 2022, 53 cities did not have enough money to pay all of their bills…
How did your state do?https://t.co/g9q672G90h pic.twitter.com/4QQGTQ0kfe
— Truth in Accounting (@truthinacct) February 16, 2024
The report acknowledges its limitations, recognizing that 2022 was still in the midst of the COVID-19 recovery process. Despite this, it highlights that these cities had received billions in federal relief funds, which should have facilitated the budget-balancing process.
