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The Financial State of California Cities 2024
California, New York and Texas each have more state debt than the 75 cities combined
By Katy Grimes, April 6, 2024 9:05 am
75 of the largest American cities owned a total of $307.4 billion of assets to pay $595.3 billion in liabilities at the end of fiscal year 2022.
The 75 largest cities in America were collectively $288 billion in debt, Adam Andrzejewski at RealClearInvestigations reported. You may recognize Andrzejewski’s name as he created OpenTheBooks and exposes spending at every level of government, which the Globe frequently uses.
The cities’ debt includes $175.9 billion for upcoming employee pensions and $135.2 billion for other retiree benefits, according to think tank Truth in Accounting.
The stunner is that California, New York and Texas each have more state debt than the 75 cities combined, Andrzejewski reported.
Notably, nearly all of the cities used outdated pension data.
How did California’s cities do?
San Francisco – D grade
“San Francisco’s financial condition deteriorated, switching it from having a Taxpayer SurplusTM to a Taxpayer BurdenTM. Despite increased tax collections
and federal COVID relief funds, the city’s pension investment values decreased. This created a per Taxpayer Burden of $8,800, earning it a “D” grade from Truth in Accounting.”
San Francisco had set aside only 92 cents for every dollar of promised pension benefits and 17 cents for every dollar of promised retiree health care benefits.
San Francisco would need $8,800 from each of its taxpayers to pay all of its outstanding bills.
San Diego – C grade
“San Diego’s financial condition worsened by $457.5 million, resulting in a Taxpayer BurdenTM of $4,100, earning it a “C” grade from Truth in Accounting.
“According to the city’s 2022 financial report, the city continued to spend federal COVID-19 relief funds, and as the U.S. economy reopened, the city took in additional tax revenue. Such economic gains were offset by increases in the city’s pension liability. Over the past few years, investment market values have swung dramatically.
San Diego had set aside only 78 cents for every dollar of promised pension benefits and only 25 cents for every dollar of promised retiree health care benefits.”
Sacramento – B grade
“Sacramento’s financial condition appeared to improve, switching it from having a Taxpayer BurdenTM to a Taxpayer SurplusTM of $300, earning it a “B” grade from Truth in Accounting. Sacramento was sneaky – the improvement is deceiving because the city used outdated pension data.
While this report indicates the city’s financial condition improved due in part to COVID relief funds and increased taxes, this might be overly optimistic because the city used outdated pension data.
According to the city’s 2022 financial report, Sacramento continued to spend federal COVID-19 relief funds, and as the U.S. economy reopened, the city took in additional tax revenue. The city’s pension liability is calculated by subtracting earned and promised benefits from the market value of pension investments. Unfortunately, the city used 2021 data when determining its pension debt. Because 2021 was an exceptionally good market year, pension investment values were high. The result was a dramatic decrease in the city’s pension liability and a corresponding decrease in the money needed to pay bills.”
Los Angeles – C grade
- Los Angeles had $19.8 billion available to pay $21.8 billion worth of bills.
- The outcome was a $2 billion shortfall and a burden of $1,500 per taxpayer. Last year the city had a surplus of $6.3 billion.
- Despite receiving almost $2 billion in grant funds and $5.6 billion in tax revenue, its unfunded pension promises increased significantly due to declines in the value of pension investments.
“Los Angeles’ financial condition deteriorated, switching it from having a Taxpayer SurplusTM to a Taxpayer BurdenTM. Despite increased tax collections and federal COVID relief funds, the city’s pension investment values decreased. This created a Taxpayer Burden of $1,500, earning it a “C” grade from Truth in Accounting.
“According to the city’s 2022 financial report, Los Angeles continued to spend large amounts of federal COVID-19 relief funds, and as the U.S. economy reopened
the city took in additional tax revenue. Such economic gains were offset by significant decreases in the value of the city’s pension investments. Over the past few years investment market values have swung dramatically. In 2022 this volatility negatively impacted the city’s pension liability and financial condition, which demonstrates the risk to taxpayers when their city offers defined pension benefits to its employees.
Los Angeles had set aside only 88 cents for every dollar of promised pension benefits and 90 cents for every dollar of promised retiree health care benefits.”
Fresno – B grade
“Fresno’s financial condition deteriorated, yet the city retained a Taxpayer SurplusTM of $2,300, earning it a “B” grade from Truth in Accounting.
According to the city’s 2022 financial report, Fresno continued to spend federal COVID-19 relief funds and as the U.S. economy reopened, the city took in additional tax revenue. Such economic gains were offset by decreases in the value of the city’s pension investments. Over the past few years investment market values have swung dramatically. In 2022 this volatility negatively impacted the city’s pension investments and financial condition, demonstrating the risk to taxpayers when their city offers defined pension benefits to its employees.
Fresno had set aside 108 cents for every dollar of promised pension benefits and no money set aside for promised retiree health care benefits.”
Oakland – D grade
“Oakland’s financial condition appeared to improve due in part to increased tax collections and federal COVID relief funds. Despite the good news, they still had a Taxpayer BurdenTM of $7,300, earning it a “D” grade from Truth in Accounting. But the improvement is deceiving, because the city used outdated pension data.
According to the city’s 2022 financial report, the city continued to spend federal COVID-19 relief funds, and as the U.S. economy reopened the city took in additional tax revenue. The pension debt included in this report and the city’s financial report is based using 2021 data when pension investments were performing well. If the city’s pension investments experienced the same major decrease that most other cities experienced in 2022, Oakland’s pension debt would be higher. Over the past few years investment market values have swung dramatically. This volatility demonstrates the risk to taxpayers when their city offers defined pension benefits to its employees.
Oakland had set aside only 78 cents for every dollar of promised pension benefits and 20 cents for every dollar of promised retiree health care benefits.”
San Jose – D grade
San Jose’s financial condition worsened by $720.3 million, resulting in a Taxpayer BurdenTM of $8,700, and earning it a “D” grade from Truth in Accounting.
According to the city’s 2022 financial report, the city continued to spend federal COVID-19 relief funds, and as the U.S. economy reopened, the city took in additional tax revenue. Such economic gains were offset by increases in the city’s pension liability. Over the past few years, investment market values have swung dramatically. In 2022, this volatility negatively impacted the city’s pension investments and its financial condition, which demonstrates the risk to taxpayers when their city offers defined pension benefits to itsemployees.
San Jose had set aside only 69 cents for every dollar of promised pension benefits and only 42 cents for every dollar of promised retiree health care benefits.
San Jose would need $8,700 from each of its taxpayers to pay all of its outstanding bills.
Stockton – B grade
“Stockton’s financial condition appeared to improve, switching it from having a Taxpayer BurdenTM to a Taxpayer SurplusTM of $1,100, earning it a “B” grade from Truth in Accounting. But the improvement is deceiving because the city used outdated pension data.
According to the city’s 2022 financial report, Stockton continued to spend federal COVID-19 relief funds, and as the U.S. economy reopened, the city took in additional tax revenue. The city’s pension liability is calculated by subtracting earned and promised benefits from the market value of pension investments. Unfortunately, the city used 2021 data when determining its pension debt. Because 2021 was an exceptionally good market year, pension investment values were high. The result was a dramatic decrease in the city’s pension liability and a corresponding decrease in the money needed to pay bills.
Over the past few years, investment market values have swung dramatically. If the city experienced the same major decrease in the value of its pension investments that most other cities experienced in 2022, Stockton had even less money available to pay promised benefits. This volatility demonstrates the risk to taxpayers when their city offers defined pension benefits to its employees.”
Here are a few of the other cities’ results:
Washington, D.C. was the healthiest of 22 cities with a taxpayer surplus with $10,700 left over for each taxpayer if the city paid all its debt.
Irvine, CA and Plano, TX are the only other two cities on the list with a taxpayer surplus above $5,000.
New York City would need $61,800 per taxpayer to pay off its debt – the largest by far despite being the most populous. NY has only six cents saved up for every dollar it will need to spend on retiree healthcare. New York received an “F” grade for its finances.
Chicago was the second-worst and would need $42,900 from each taxpayer to pay off its debt, and received an “F” grade for its finances. That’s partly because the city’s pension liability increased by $1.7 billion in 2022.
Honolulu would need $24,200 from each of its taxpayers to pay all of its outstanding bills, and received an “F” grade for its finances.
Philadelphia would need $20,400 from each of its taxpayers to pay all of its outstanding bills and received an “F” grade for its finances.
Portland, OR would need $20,100 from each of its taxpayers to pay all of its outstanding bills and received an “F” grade for its finances.
RCP found with these results, Honolulu, Philadelphia and Portland, Oregon round out the five most burdened cities.
You can find your city easily in the Truth in Accounting report – they are listed alphabetically.
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When Stockton is more fiscally sound than any other Calif city, you know the entire state is in major doo doo.
Did Stockton finally learn from their own self-inflicted school of hard knocks a few years ago, or do they just look good only in comparison?
It’s only because they manipulated the data.
It’s a shame the authors of the US constitution were not able to foresee this and make deficit spending by any municipal government unconstitutional.
Past few decades of Democrats, SEIU and the teachers unions super-majority domination of this state, makes one nostalgic for King George, and the pre-Revolutionary good old days.
I recall about 20 years ago when political columnist Dan Walters said California would probably be better off being ruled by a benevolent monarch than the corrupt governors and legislators we’ve had for the past 30 years.
Just about all of the Pension # shown are VERY misleading. That is BECAUSE Gov’t accounting Standards allows the use of MUCH higher interest rates (than the Gov’t REQUIRES Private Sector single-employer pension plans to use) in discounting future year liabilities to the valuation date in the determination of funding level and hence funding shortfalls.
On average, had Gov”t Plans used the SAME rate as that required by Private Sector plans, Plan liabilities would be about 1/3 higher, and this would create a HUGE funding shortfall.
As a follow-up to my above comment, to further explain WHY Gov’t Accounting standards materially UNDERSTATE Gov’t Pesnion Plan liabilities, I am linking below to an article that give the complete picture. The title of the article is :
New Disclosure Rules Expose Bad Actuarial Finance; Obscures Trillions of Public Pension Debt
The link to this article can is here:
https://theopinionpages.com/2023/12/new-disclosure-rules-expose-bad-actuarial-finance-obscures-trillions-of-public-pension-debt/
Whoa!!!! I thought Newsomlini took the state into a $73 BILLION deficit?????? So………………………how does he think he can spend $250 MILLION of taxpayer funds to provide down-payments for first-time home buyers? And where in the Constitution does it authorize the use of taxpayer funds to give it away as charity?????? Is buying a home now a state right???