Question 1: Why didn’t Maine get a better grade in this report?
They got a C because it would take $2,300 from every taxpayer for the state to pay off all its bills.
If the state used every penny it has available right now to pay its current bills, it would still be short by $1.3 billion.
Last year it was worse ($2 billion) so the state definitely made improvements. However, Truth in Accounting says some of that improvement is only on paper. The state changed its accounting procedures and is now estimating that it will pay less to teachers for healthcare in the future.
Maine has never had a surplus since Truth in Accounting started doing this report in 2009. But this is the closest they’ve ever come to balancing their budget in that time span.
Question 2: But
Maine’s treasurer says it would only take $1,100 from every Maine resident to pay off the state’s debt, and it can all be paid with current taxes. Truth in Accounting’s number is twice as high. Why?
There’s a few reasons.
Almost every state in America has a law saying their budget must be balanced, so they all claim that it is balanced.
But that often isn’t entirely accurate. Most states will underestimate expenses in their financial statements and push the costs into the future, just to make it appear that the budget is balanced and there’s no bills that can’t be paid. But eventually the bills will come due.
A lot of that comes from money Maine has invested to later pay its state workers for healthcare and pensions once they retire.
State financial statements don’t account for market changes in those investments, even though they go up and down just like your stocks or 401k.
Truth in Accounting says once you account for those market changes, Maine needs to save up an extra $5 billion for what it will eventually need to pay retirees. Not all of that is for right now - the cost will gradually reach that point as employees work more years and their pensions get larger.
Question 3: Break that number down for us. Why would Maine need so much money from every taxpayer to pay off its debt?
Source: Truth in Accounting
Right now the state has $12.3 billion in total bills.
Half of that is for bonds.
You probably remember voting on some large construction bonds in the last few years, but it’s actually some of the smaller ones that are going to cost the state more money. Maine has some
bonds on its books with 10% interest rates that they won’t pay off for 20 years. So for example one $33 million bond issued for agriculture improvements is actually going to cost the state $68 million.
Their bond debt has only gone up since last year ($50 million increase).
Question 4: How do Maine’s bills compare to other states?
They’re ranked #31, so right about average.
That’s good compared to most of New England. Connecticut is ranked dead last - it would take over $44,000 from every person in the state to pay all their bills.
Massachusetts and Vermont are also in the bottom 10. New Hampshire is the only New England state ranked above Maine, but even they’re below average.
There’s 23 states that could pay all of their bills and still have money left over to give back to their taxpayers if they wanted to.