By Dave Fidlin | The Center Square
Faced with a $2.2 billion shortfall of unfunded financial obligations, New Hampshire entered the current pandemic playing catch-up and could face more challenging headwinds in the future, a new report states.
Truth in Accounting, a Chicago-based nonprofit focused on government spending, has unveiled its annual report, Financial State of the States 2020. In it, analysts placed the Granite State toward the middle of the pack – No. 24 – which earned a grade of “C” for the state’s overall fiscal health.
The state’s middling ranking was based on unfunded retiree pension and health care benefits – an issue that has been noted in the past.
“New Hampshire’s financial problems stem mostly from unfunded retirement obligations that have accumulated over the years,” the report states. “Of the $5 billion in retirement benefits promised, the state did not fund $1 billion in pension and $2.1 billion in retiree health care benefits.”
Using its data from the state’s most recent audited financial statements, Truth in Accounting analysts assert New Hampshire had $2.4 billion available to pay $4.6 billion worth of bills at the start of the pandemic.
“The outcome was a $2.2 billion shortfall, which breaks down to a burden of $3,900 per taxpayer,” the report states.
Sheila Weinberg, founder and CEO of Truth in Accounting, said the report is aimed a putting a spotlight on government spending practices – most notably, borrowing large sums of money and kicking the figurative can down the road to cover short-term costs, such us unfunded retiree costs.
“(State and local governments) were claiming that they were balancing their budgets, but they were using what I call political math to pretend they were balancing them,” Weinberg said in an interview with The Center Square.
If there is a silver lining to the pandemic, Weinberg said she hopes the cash crunch that has arisen from months long lockdowns and other policy decisions serves as a wake-up call to politicians and residents alike on the budgeting process.
“Nobody in (Washington), D.C., or around the country, was paying attention to these state and local governments who were doing reckless budgeting,” she said.
Other organizations, including the think tank Tax Foundation, have also scrutinized the condition of states’ public pension plans. In its most recent report, Tax Foundation analysts noted New Hampshire’s pension plan was 63 percent funded.
“The current crisis highlights the cost of underfunding pensions in years of economic growth,” Janelle Cammenga, policy analyst with the Tax Foundation, wrote. “Replenishing the funds will be extremely challenging now, as state revenues decline.”
Cammenga added, “States that failed to use more than a decade of economic growth to shore up their funds will be in particularly poor shape now.”
New Hampshire was far from alone in terms of states not having enough cash on hand to cover all outstanding financial obligations before the novel coronavirus.
According to their findings, Truth in Accounting analysts said 39 states entered the pandemic in a financial shortfall.