A recent study by Truth in Accounting examined America’s 75 most populated cities’ fiscal health. While it’s no surprise most cities are carrying debt, the results were eye-opening. Many major cities in the U.S. are operating with a dangerously unbalanced budget that is unsustainable for the long term.
Sobering Statistics
The study, called Financial State of the Cities 2023, was done by Truth in Accounting. It has some difficult truths: 50 out of 75 cities could not pay their bills; the combined debt for all 75 cities is $267 billion. Moreover, elected officials didn’t include the cost of government in this figure, instead pushing it onto future taxpayers.
Cities that cannot pay their bills at the end of each fiscal year are known as ‘sinkhole’ cities, while those that can are called ‘sunshine’ cities. Each city receives grades between A and F — the lowest grade is F, which means the tax burden per citizen exceeds $20,000.
Here are the ten most fiscally troubled sinkhole cities in serious danger of bankruptcy.
10. Miami, Florida – Grade: D
Miami steals in for the tenth spot. The Magic City has almost $2 billion of unfunded pension and healthcare benefits, with a $14,000 tax burden for its employed residents. However, pension debt is decreasing. Curiously, the police and firefighters’ pension plan investments reached almost 20% returns in 2021.
9. Pittsburgh, Pennsylvania – Grade: D
Elected officials’ decisions have added to Pittsburgh’s woes, and the city currently has an unpaid debt of $1.5 billion. Federal pandemic funding ran dry during a bearish year for the markets. Subsequently, Pittsburgh’s taxpayers would need to pay $14,600 each to save Steel City’s financial bacon.
8. Dallas, Texas – Grade: D
In 2022, dormant retirement obligations and negative market returns affected Dallas’ fiscal health, leaving the city with $5.9 billion in debt. This figure amounts to $14,700 needed for each taxpayer to help Dallas’ monetary troubles.
7. St. Louis, Missouri – Grade: D
The Gateway to the West has a much lower deficit than its predecessor and drops into the D column, with a lower tax burden of $18,000. However, things are not looking good with an unbudgeted $654.5 million in health care retiree entitlements for city workers due.
6. Philadelphia, Pennsylvania – Grade: F
The post-pandemic landscape has looked better for Philly of late; however, they still have an F for their almost $12 billion deficit. However, Philadelphia is a large city, so to balance the books, taxpayers would need to stump up $21,800 per person.
5. New Orleans, Louisiana – Grade: F
The Big Easy is 71st out of 75 cities in the study, sitting within the dreaded F-zone for their fiscal report. In the past, city officials have been guilty of underfunding pension entitlements and reneging on retiree health care pledges. Moreover, the city is one of many that submitted their fiscal report late, meaning poorer fiscal conduct worsened their total debt.
4. Portland, Oregon – Grade: F
With a higher debt of $5.2 billion, Portland wins an F for its fiscal health. However, thanks to Portland’s larger population, its tax burden is lower than Honolulu’s. Despite a short-term boost to its pension assets’ valuation, Portland only put aside 44 cents on the dollar for promised pension benefits.
3. Honolulu, Hawaii – Grade: F
The city would require $26,100 in tax recoupment from every state citizen, surpassing the F-grade threshold of $20,000 per taxpayer. Although its tax burden in 2020 was over half a billion more than now, it still finished the fiscal year with a $3.3 billion deficit. Honolulu sits third out of the 75 cities.
2. Chicago, Illinois – Grade: F
Chicago stands at being the second-most in-debt city in America. The town faces incredible challenges with crime and now pension-based debt. The city officials only set aside 25 cents on the dollar in promised pension benefits in 2022.
1. New York City – Grade: F
New York City has always been the financial beating heart of the U.S. economy. Still, due to a backlog in unfunded retirement entitlements and a litany of bad legislative decisions, New York has the highest tax burden of any state.
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Source: Truth in Accounting.
