by Paige Terryberry
Senior Analyst for Fiscal Policy, John Locke Foundation
Truth in Accounting, an organization dedicated to educating the public about government financial information, released their 2022 Financial State of the Cities report today. The report analyzed the fiscal health of the United States’ 75 most populous cities. Due to many factors, chief among them being unfunded retirement liabilities, 61 of those cities do not have a balanced budget and are unable to pay their bills.
Both Raleigh and Charlotte, however, ranked among the 14 cities with a laudable surplus. Unlike the majority of cities in the report, Raleigh and Charlotte had more than enough resources for their bills.
Greensboro, the only other North Carolina city in the report, earned a “C” grade for its large debt, totaling $1,500 per taxpayer. Greensboro was one of 26 cities that received a “C” grade. Thirty-five other cities received grades of “D” or below. The report revealed Greensboro’s debt is due to ballooning unfunded retirement obligations: the city set aside just 86 cents for every dollar promised to its retiree health benefits program.
It is worth noting that each of the three North Carolina cities received federal funds for Covid relief, cushioning their financial situation.
Though each city has some manner of a balanced budget rule, accounting tricks such as counting borrowed money as income, hiding current bills by punting them to the next fiscal year, and excluding the true retirement cost of state employees cause confusion and may allow cities to manipulate their bottom line.
Accurate financial accounting is crucial. Accounting tricks do not accurately portray a city’s financial situation and create a climate for more debt and waste. If leaders do not understand the root cause of debt, from pension plans, for example, they will continue to burden taxpayers.
Befuddled politicians may extend or create programs and increase spending not knowing their true fiscal state.
The report underlines the importance of financial accounting and North Carolina’s two major cities provide a commendable example.