WHERE DOES STATE TAX MONEY GO?
–Q: CURT: “What average percent of state taxes are for employee salaries, benefits, including those payments for benefits of those already retired, and their unfunded liabilities?”–
TLDR: Up to 70%
Salaries: Employee salaries are usually one of the largest expense items in a state budget. They can range anywhere from 20% to 40% depending on the state.
Benefits: Benefits, including health insurance and pension contributions, can add another 5% to 20% to the budget.
Retired Benefits: The costs for retired employees’ pensions and healthcare can vary significantly but can also be a significant part of the state’s budget, depending on the retirement system’s funding level. These can add another 5% to 15%.
Unfunded Liabilities: These don’t usually show up in the annual budget but are a long-term liability. They are often calculated separately and can range widely, but they are a significant financial consideration for many states.
Adding these up, it’s possible that 30% to 75% of a state’s budget could go toward current and former employee salaries and benefits, although this is a rough estimate and the actual percentages will vary by state and over time.
WHAT STATES AND CITIES ARE “BANKRUPT” BECAUSE OF THESE OBLIGATIONS?
States:
Illinois: Illinois has one of the worst-funded pension systems in the U.S. and also suffers from significant structural budget deficits.
New Jersey: New Jersey’s pension system is also severely underfunded, and the state has large amounts of debt.
Connecticut: Connecticut is another state with a poorly funded pension system, and it has high levels of public debt.
Kentucky: The state pension system is significantly underfunded, creating long-term liabilities.
California: While California has a strong economy, some of its cities (like Los Angeles and San Francisco) face severe pension and healthcare liabilities.
Cities:
Chicago, Illinois: Chicago has one of the most underfunded pension systems among U.S. cities.
New York City, New York: Despite a strong economy, New York City has significant long-term pension and healthcare obligations.
San Francisco, California: Similar to New York, San Francisco faces long-term financial challenges due to pension liabilities.
Philadelphia, Pennsylvania: Philadelphia has struggled with pension liabilities and has a relatively high debt level.
Detroit, Michigan: While Detroit has already gone through bankruptcy, its financial condition remains precarious due to legacy costs and a declining population.
Houston, Texas: Houston has a large pension shortfall, and despite some reforms, it continues to face long-term financial challenges.
Dallas, Texas: Similar to Houston, Dallas has struggled with unfunded pension liabilities, which have put strain on the city’s finances.
New Orleans, Louisiana: In addition to debt, New Orleans faces pension and other post-employment benefits (OPEB) liabilities that could be problematic in the long term.
Baltimore, Maryland: The city has an underfunded pension system and other long-term obligations that contribute to its financial challenges.
Los Angeles, California: While part of a strong state economy, Los Angeles faces substantial pension liabilities and has struggled with fiscal stability.
Again, the financial situation for cities is complex and multi-faceted, but these cities have been cited for their challenges in managing long-term debt