Back in March we shared the staggering results of a Bankrate survey which found that the average American household couldn’t afford to write a measly $500 check in the event of an unexpected emergency (see: “The Reality Is, Half Of Americans Can’t Afford To Write A $500 Check”). Of course, as we note frequently, while the talking heads of daytime financial TV shows love to reference surging economic indicators like unemployment figures, the fact is that the number of Americans not participating in the work force remains near all-time highs and wage growth, despite “full employment” levels, has been practically non-existent since the great recession.
Given the above, we can only presume that the average person in New Jersey, Connecticut, Illinois, Kentucky, etc. is going to have a somewhat difficult time producing their $10,000 – $27,000 share of their state’s massive pension and debt obligations.
As CNBC points out today via S&P Global Ratings, decades of budget mismanagement and hollow pension promises to public employees has resulted in a mountain of debt that many states are unlikely to ever repay.
New Jersey has set aside just 31 percent of what it needs to pay pensions costs. Kentucky, (31 percent) Illinois (36 percent) Connecticut (41 percent) and Hawaii (541 percent) are the worst off.
States with the best funding levels include Wisconsin (98 percent), South Dakota (97 percent), New York (93 percent), Tennessee (88 percent) and North Carolina (87 percent).
In New Jersey, the funding gap represents nearly 42 percent of the Garden State’s Gross State Product – or more than $27,000 for every resident, according to S&P Global Ratings.
Other underfunded states include Connecticut ($22,700 per person), Hawaii ($15,700), Illinois ($15,900) and Alaska ($18,200).
That compares with Nebraska, where the underfunding represents just $242 for every resident. Taxpayers in South Dakota ($598 per person), Idaho ($472), Iowa ($752), and Tennessee ($806) also face relatively low risk of having to make up for unfunded state liabilities.
Of course, we can’t help but notice that 8 of the 10 worst funded states in America just happen to be “deep blue” bastions of liberalism. Could it be that perpetually higher taxes and overly burdensome regulations end up being negative for state budgets in the long term?