Debt Per Taxpayer
by Tom Yamachika, President, Tax Foundation Hawaii
Each year, some smart people in the nonprofit Truth in Accounting pore over the financial statements of the several States and compare them. We last reported on their findings five years ago when they gave us some utterly depressing news: when you added up what we have, including cash and other assets available to pay bills, and subtract what we are obligated to pay, including not only bond debt but also commitments to pay state retirees pensions (our Employees’ Retirement System, or ERS) and provide them health care for life (the Hawaii Employer-Union Health Benefits Trust Fund, or EUTF), the result, when divided by our taxpayer population, was a staggering $37,000 per taxpayer. (Debt attached to capital assets like land and buildings is not counted because the capital assets are not counted.)
The current year’s report recently came out. It tells us that we have made great strides in addressing the financial problems, but that we are not out of the woods yet.
Source: Truth in Accounting, 2026 Financial State of the States, p. 48.
The report found that the burden per taxpayer had been pared to around $4,500, definitely a huge improvement. But there are other challenges, as the report states:
Hawaii's financial position improved significantly in fiscal year 2025, with revenues exceeding expenses. Taxes accounted for 54.2 percent of total revenues, while grants and contributions, including federal aid, represented 27.9 percent. Despite this progress, the state continued to face substantial long-term obligations related to unfunded pension and retiree health care liabilities. The Employees’ Retirement System of Hawaii has not released updated 2025 financial reports, limiting transparency and public trust while hindering effective oversight of the state’s pension plans.
Hawaii received approximately $6.6 billion in federal grants, which represented 27 percent of its revenue. The federal government mandates that entities receiving significant federal funds undergo a Single Audit. These audits are intended to be the taxpayers' first line of defense against potential fraud and abuse. Auditors found that Hawaii relies heavily on audit corrections to produce accurate financial statements year over year. The audit also found technology issues, untimely distribution of federal grant money, and staffing shortages-revealing weaknesses in systemic control and coordination across multiple agencies.
To us, we have known some time about challenges posed by ERS and EUTF. The part about constantly needing audit corrections was somewhat disturbing.
If auditors need to make significant corrections in an end-of-year financial statement, it means the interim statements issued throughout the year by the State’s financial staff, which department heads and lawmakers presumably base their decisions on, leave something to be desired.
In addition, weaknesses in systemic control and coordination are bad signs, and untimely distribution of grant money means bad decisions are being made and there are problems left to fix.
Key financial reports that come in late, like the ERS 2025 report referred to, cause problems for similar reasons: the value of information diminishes if it is untimely. That’s why Truth in Accounting reported on “Zombie States,” shambling along without good financial direction, and we reported on it here. (We were the sixth worst in 2016, and the tenth worst in 2021. It seems we may have risen out of that pit of despair since then, although there is more work that needs to be done.)
Let’s make sure that future years do not result in a retrenchment of our financial difficulties.