Advertisement

70% Of Largest US Cities Broke, Don’t Have Enough Money To Cover Costs

Advertisement

OPINION: This article may contain commentary which reflects the author's opinion.


A new analysis has found that the vast majority of America’s largest cities — most of which are run by Democrats and have been for decades — are broke and could not pay all of their bills in FY 2022.

The Center Square reported that the study found that “70% of the largest cities in the United States did not have enough money to pay their bills,” adding that the information came from the “latest comprehensive analysis of the fiscal health of the 75 most populous cities in the United States,” 53 of which were insolvent.

In its eighth annual Financial State of the Cities report, Truth in Accounting (TIA) discovered that the 75 largest cities in the United States collectively had around $307.4 billion in assets to cover expenses. However, their total debt, which includes unfunded retirement benefit commitments, amounted to $595.3 billion.

According to the analysis, pension and healthcare obligations constituted the bulk of the debt owed. Pension debt stood at $175.9 billion, while other post-employment benefits (OPEB), primarily retiree healthcare, amounted to $135.2 billion, the outlet reported, citing the TIA analysis.

The Center Square adds:

Advertisement

All 75 cities are required by law to have balanced budgets. For those with debt, in order to claim their budgets were balanced, TIA argues elected officials didn’t include all government costs in budget calculations, thereby pushing costs onto future taxpayers. Instead, they used “accounting tricks,” including “inflating revenue assumptions, counting borrowed money as income, understating the true costs of government, and delaying the payment of current bills until the start of the next fiscal year so they aren’t included in the budget calculations.”

“The most common accounting trick” employed to underestimate expenses is the exclusion of “true compensation costs” of employee benefits such as health care, life insurance, and pensions, the analysis said.

“While pension and other post-employment costs, such as health care, will not be paid until the employees retire, they still represent current compensation costs earned and incurred throughout their tenure,” said the analysis, adding that city leaders ought to be including those contributions in their budgets.

The organization also discovered that some local elected officials “have used portions of the money owed to pension and OPEB funds to keep taxes low and pay for politically popular programs. Instead of funding promised benefits now, politicians have charged them to future taxpayers” to make it seem like budgets are balanced but are, in fact, concealing debt, said TIA.

Some of the cities’ financial problems are attributable to the lowered market value of pensions, TIA said.

Advertisement

“In 2022, the cities continued to receive and spend federal COVID-19 relief funds, and as the U.S. economy reopened, they took in additional tax revenue. Such economic gains were offset by increases in their pension liabilities, which were caused in large part by decreases in the market value of pension investments,” said the analysis.

“Over the past few years, investment market values have swung dramatically. In 2022, this volatility negatively impacted most cities’ pension investments and their financial condition, which demonstrates the risk to taxpayers when cities offer defined pension benefits to their employees,” it added.

The Center Square noted further: “Of the 75 cities evaluated, only 1% received an A grade for fiscal health. The majority received D grades, followed by C and B grades, according to the analysis.

“The five cities with the greatest surpluses were Washington, D.C. ($10,700), Irvine, California ($6,100), Plano, Texas ($5,100), Lincoln, Nebraska ($4,100), and Oklahoma City ($2,900). Rounding out the top ten with the greatest surpluses were Aurora, Colorado; Fresno, California; Raleigh, North Carolina; Virginia Beach; and Corpus Christi, Texas.”

Test your skills with this Quiz!

Nine of the top 10 cities with the highest tax burdens are under Democratic control.

The highest taxpayer burden is in New York City, which is at -$61,800. Chicago is next at -$42,900, Honolulu is at -$24,200, Philadelphia is at -$20,400, Portland is at -$20,100, New Orleans is at -$18,200, Miami (R) is at -$15,500, Milwaukee is at -$15,300, and Baltimore is at -$14,100.

Advertisement