Truth in Accounting has released the second edition of its report Financial State of the Cities, and the news ain’t grand for New Mexico’s largest municipality.
The advocacy organization, which works to “compel governments to produce financial reports that are understandable, reliable, transparent and correct,” laments that since “government financial statements do not report all liabilities, elected officials and citizens are making financial decisions without knowing the true financial condition of their government. The lack of accuracy and transparency in government accounting prevents even an experienced user of government financial documents from understanding and evaluating a public-sector entity’s financial health.” This year’s Financial State of the Cities examined “the 75 most populated cities,” pondering the pesky question of whether the entities “have enough money to pay their bills.”
Overall, the results are dismal. Sixty-four of the 75 were under water, with inadequate assets-to-liabilities ratios. (Philadelphia, Chicago, and New York were the worst “sinkhole cities.”) Albuquerque ranked 34th — not the worst, but far from the best — and per capita, its taxpayer burden stood at $4,500 for the 2016 fiscal year.
The news doesn’t come as a shock to followers of the Rio Grande Foundation’s work. Last year, in an exploration of Albuquerque’s fiscal situation, the Foundation noted that:
At the end of the 2016 fiscal year, the city reported a net pension liability of $493.87 million — a sum nearly as large as a single year of expenditures by Albuquerque’s general fund. In addition, the trust established by the city and the Albuquerque Bernalillo County Water Authority to cover life-insurance costs is funded at only 28.5 percent, with a total assets-to-obligations calculation of -$36.9 million. The New Mexico Retiree Health Care Authority’s unfunded actuarial accrued liability is $3.8 billion, of which Albuquerque’s share is currently unknown, but doubtless substantial.
The booming stock market of the “Trump bump” has surely helped improve the financials of all cities, but there’s no question that taxpayers remain substantially on the hook for the outrageous promises pols have made to government-employee unions at the local level. In New Mexico and elsewhere, “public servants” must be moved to defined-contribution pensions plans, immediately. Lifetime post-employment healthcare, a benefit that barely exists in the private sector, need to go. And cash payouts for unused paid leave should be shifted to a use-it-or-lose-it policy.
Think the 2018 legislative session will devote any attention to the unfunded liabilities of local governments in New Mexico? Errors of Enchantment doesn’t, either.
2 Replies to “When Unfunded Liabilities Attack!”
An enabler of hidden city debt has been the bond rating agencies such as Moody’s and S&P. Many of the cities on the list would have had lower municipal bond ratings had public sector pension debt been fairly valued.The rating agencies obviously did not look too hard. So to the list of negatives for Albuquerque including mediocre job market, miserable public school system and high crime, we add that the city owes hundreds of million more than its assets.
Charles, thank you for bringing up the rating agencies, another example of biased entities that are part of the levers of power. When the true costs of products and services are shown, without subsidies provided by the government, the market (voting taxpayers) will determine whether the cost is reasonable. Period. Taxpayers are not stupid and know how to be good stewards of their money when given accurate information.