A financial 'bomb cyclone' is coming for the states in 2018

January is traditionally the time to put the past behind us, turn over a new leaf, and make plans for what’s to come. Many indicators show the country’s economy has been pumping on all cylinders this past year. Stocks are at record highs and the unemployment rate is at its lowest point in 17 years. Many would agree that the economy is moving in the right direction, which is excellent news.

Unfortunately, this optimistic news is somewhat undercut by worsening financial trajectories at the state government level from coast to coast. The nation is not in as good a shape as it seems.

Recently updated government financial disclosures show alarming levels of red ink on statehouse ledger books across the country. A 2017 analysis shows $1.5 trillion in state debt, a 15 percent increase over the previous year and part of a long-term worsening trend. In the last year, only seven states reported improved financials, while three were unchanged, and 40 are on a troubling downward trajectory.

There is a significant variation in the fortunes of the 40 downward trending states, which include examples at both ends of the extreme, such as Alaska’s declining surplus and New Jersey’s skyrocketing $208 billion debt. However, when the data is taken as whole it is hard to understate the scale of the precarious fiscal situation at the state government level. Truth in Accounting, an organization I founded in 2002, analyzes the most recent Comprehensive Annual Financial Reports, and our data shows that the average state now carries a staggering $10,020 in debt for every one of its taxpayers.

TIA’s sister site, State Data Lab, is a statistical resource created to help citizens understand the complex relationship between inputs and outputs that has led to this fiscal tailspin. None of these data points can be interpreted in a vacuum, but a clear image emerges when they are considered as a whole. Across the most financially challenged states, you can find above average public-sector compensation, higher unionization, and more egregious gerrymandering.