HONOLULU — A report by a fiscal watchdog deems Hawaii one of the worst “sinkhole” states for its growing debt burden to taxpayers.
Chicago-based Truth in Accounting reviewed the finances of every state, focusing on unfunded liabilities such as pension and health care obligations to current and retired public-sector workers, for its annual “State of the States” report.
Only Massachusetts, New Jersey, Illinois and Connecticut are in worse fiscal condition that Hawaii.
Donna Rook, president of StateDataLab.org, a division of Truth in Accounting, said Hawaii has been one of the five worst states since this annual study was started in 2009.
“The average Hawaii taxpayer’s share of the state’s debt is $27,000 after available assets are tapped. Since we set aside both capital assets and debt related to capital, the remaining debt is primarily unfunded pensions and retirement health,” Rook said.
The $27,000 per taxpayer is about 57 percent of the average resident’s annual income, Rook said.
Sheila Weinberg, founder and CEO of Truth in Accounting, said Hawaii financial statements show $4 billion in retirement liabilities, but the state actually has nearly $15 billion of unfunded retirement promises.
Hawaii has only $5 billion to pay the state’s bills, which total $18 billion, Weinberg said.
Despite these financial realities, Gov. Neil Abercrombie’s administration has touted its fiscal prudence since being elected governor in 2010, and continued to do so through his primary re-election campaign.
Both Abercrombie and his primary challenger, Senate Ways and Means Chair David Ige, exchanged barbs leading up to the election over who was responsible for Hawaii’s fiscal “turnaround.”
Ige beat Aberrombie by 36 percentage points in the primary, constituting the largest primary loss by a governor in U.S. history and represented the first time a sitting Democratic governor in Hawaii was defeated in a bid for re-election.
Abercrombie’s administration claimed credit for the state depositing $100 million to the Hawaii Employer-Union Health Benefits Trust Fund in late June to “prefund” the cost of the state’s unfunded liabilities, including health insurance premiums and life insurance for state retirees.
Abercrombie said, in the past, the state opted to pay only the required minimum annual premiums, but is now working to pay down the $11 billion debt ahead of schedule.
Gov. Neil Abercrombie touted his fiscal prudence during his final 2014 State of the State Address
Under Abercrombie, Hawaii also enacted Act 268 in 2013, mandating state and county governments pay at least 20 percent of the annual amount needed to fund promised benefits to current and retired workers by fiscal 2015. That percentage bumps up 20 percent annually until 2019, when the funding mandate reaches 100 percent, and continues for at least 30 more years.
At least Hawaii made progress in the speed of its fiscal reporting: the state was listed earlier this year as one of Truth in Accounting’s most improved states for timeliness releasing 2013 year-end financial reports.
Despite some progress, Weinberg has continued to criticiz Hawaii for “ignoring related employee compensation cost.”
She said the administration claimed it met the state’s constitutional balanced budget requirement, while putting off more than $600 million of compensation costs related to retiree benefits.
Hawaii’s next governor will have to deal with taxpayers’ substantial debt, but Abercrombie won’t have that responsibility.