Hawaii receives poor marks for budgeting balance in new report
by Merrilee Gasser, The Center Square, Oct 11, 2023
(The Center Square) – Hawaii lacked enough money to cover $11.4 billion worth of bills at the end of fiscal year 2022, according to a new report.
The state had $11.2 billion available to cover $22.6 billion worth of bills, which breaks down to $15,000 per taxpayer. Overall, Hawaii has a taxpayer burden of $23,100 per taxpayer, according to Truth in Accounting’s State of the States report.
The think tank annually ranks states based on their fiscal health. This year, Hawaii remained in the bottom five despite some financial conditions improving. Other bottom five states included Massachusetts, Illinois, Connecticut, and New Jersey came in last.
Hawaii ranked 46 out of 50, receiving an “F” financial grade, which is given to any state with a taxpayer burden greater than $20,000. Only six states including Hawaii received “F” grades.
Hawaii’s financial pitfall came despite having a balanced budget requirement, which calls for spending to be equal to revenue brought in during a specific year. Only Vermont does not have this type of requirement.
Sometimes states find ways to fulfill the balanced budget requirement by inflating revenue assumptions or counting borrowed money as income, the report said.
Some factors improved for Hawaii financially in 2022. Although its investment income dropped, it increased its funded pension promises, which the report said was due to “substantial” investment income the pension system received in 2021.
Hawaii was among 28 states that did not have enough money to pay its bills. Total state debt across the nation was $938.6, a decrease from $1.2 trillion at the end of fiscal year 2021, the report found.
Two factors contributing the most to decreased state debt were increased tax revenues and temporary federal COVID funds, according to the report.
“Hawaii’s economy rebounded post-pandemic: hotel occupancy was up 18.6% from 2021, and total tax revenue increased by over $1.2 billion,” the report said. “However, this was not enough to move Hawaii out of the bottom five Sinkhole states. Furthermore, Hawaii depends on tourism dollars and the recent devastating fire on Maui may adversely impact Hawaii in 2023.”
West Maui just began reopening to tourists this week after being closed for two months following the Aug. 8 fires in Lahaina.
The Hawaii Department of Business, Economic Development & Tourism told The Center Square air bookings were down for October compared to last year and domestic passenger counts to Kahului Airport were lower than the daily average before the fires.
Maui isn’t expected to reach its previous tourism levels until next year.
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Financial State of the States 2023
from Truth in Accounting, October 11, 2023
Truth in Accounting releases its fourteenth annual Financial State of the States report, a comprehensive analysis of the fiscal health of all 50 states based on fiscal year 2022 annual comprehensive financial reports, the latest available data.
The report found that Hawaii's financial condition improved in 2022, but the state still needed $11.4 billion to pay its bills.
According to the report, at the end of fiscal year 2022, 28 states did not have enough money to pay all of their bills. In total, debt among the states was $938.6 billion, which is down from $1.2 trillion at the end of fiscal year 2021. Overall, it appeared state debt decreased primarily due to the following two factors: tax revenue increases due to the lockdowns ending, and millions, if not billions, of dollars in federal COVID funds received by the states.
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Bottom 5 Sinkhole States
(46) Hawaii improved its financial condition from 2021, but it still needed $11.4 billion to pay its bills. This breaks down to $15,000 per taxpayer. Hawaii’s economy rebounded post-pandemic: hotel occupancy was up 18.6 percent from 2021, and total tax revenue increased by over $1.2 billion. However, this was not enough to move Hawaii out of the bottom five Sinkhole states. Furthermore, Hawaii depends on tourism dollars and the recent devastating fire on Maui may adversely impact Hawaii in 2023.
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Based upon the state’s latest audited financial report for fiscal year 2022, Hawaii had a Taxpayer Burden of $23,100, which is the amount every taxpayer would have to contribute to get the state out of debt.
Like many states, Hawaii’s economic condition improved due to federal funding for COVID relief and increased tax collections attributed to taxpayers’ pent-up tourism and purchasing demands. However, unfunded pensions and other employee retirement obligations continued to plague the state.
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State finances seemingly improved but were cushioned by federal funds
States collected billions of dollars in federal COVID funds in fiscal year 2022
News Release from Truth in Accounting, October 11, 2023
CHICAGO – Taxpayers and citizens deserve easy-to-understand, truthful, and transparent financial information from their governments. This is the belief of Truth in Accounting, a think tank that analyzes and makes sense of lengthy, cumbersome, and sometimes misleading government financial reports. Today, in partnership with the University of Denver’s School of Accountancy, they released their fourteenth annual Financial State of the States (FSOS) report, which provides a comprehensive analysis of the fiscal health of all 50 states based on fiscal year 2022 annual comprehensive financial reports, the latest available data.
According to the report, at the end of fiscal year 2022, 28 states did not have enough money to pay all of their bills. In total, debt among the states was $938.6 billion, which is down from $1.2 trillion at the end of fiscal year 2021.
Overall, it appeared state debt decreased mostly due to the following two factors: tax revenue increases due to the lockdowns ending, and millions, if not billions, of dollars in federal COVID funds received by the states. Tourism and individual spending increased significantly so that most states collected more money from tax revenues, often improving a state’s ability to pay its bills.
Every state, except Vermont, has a balanced budget requirement. This means that to balance the budget—as the law requires in 49 states—states should not carry any debt. However, we found that most states could not pay all of their bills. When states do not have enough money to pay their bills, TIA takes the money needed to pay bills and divides it by the estimated number of state taxpayers. The resulting number is a Taxpayer Burden™. Conversely, a Taxpayer Surplus™ is the amount of money left over after all of a state’s bills are paid, divided by the estimated number of taxpayers in the state.
The majority of state debt comes from retirement plans, such as pension and retiree health care benefits. On average, the 50 states had only set aside 71 cents for every dollar of promised benefits to fund pensions and 11 cents for every dollar to fund retiree health care promises.
“We are happy to see state debt decreasing but states should not count on temporary federal funding and increased tax collections to fix their long-term problems,” says Sheila Weinberg, founder & CEO of Truth in Accounting. “Elected officials need to include the true costs of government in their budget calculations, including accruing retirement benefits so that they can make real progress towards a healthier financial future.”
Truth in Accounting’s Financial State of the State report provides valuable insights into the fiscal health of each state, including rankings, letter grades, pension data, and timeliness standards. No other report analyzes state finances in such detail or uses a consistent methodology to allow for comparisons between states and over time.
Founded in 2002, Truth in Accounting is dedicated to educating and empowering citizens with understandable, reliable, and transparent government financial information. Sheila Weinberg, founder and CEO, is a Certified Public Accountant with more than 40 years of experience in the field.