Financial State of the Cities 2024

from Truth in Accounting, February 15, 2024

At the end of the fiscal year 2022, 53 cities did not have enough money to pay all of their bills. This means that to claim their budgets were balanced—as is required by law in the 75 cities—elected officials have not included the actual costs of the government in their budget calculations and have pushed costs onto future taxpayers.

Together, the 75 cities had $307.4 billion worth of assets available to pay bills; their debt, including unfunded retirement benefit promises, amounted to $595.3 billion.

Pension debt totaled $175.9 billion, and other post-employment benefits (OPEB), mainly retiree health care, totaled $135.2 billion.

PDF: FULL REPORT

HONOLULU 3rd-WORST SINKHOLE CITY WITH $24,200 IN DEBT PER TAXPAYER

While the city’s money needed to pay bills decreased, its financial condition remained the third worst in the 75 cities studied. The city was helped by receiving COVID relief funds and additional tax revenue. Changes in how the city’s actuaries estimated promised pension benefits, including an increase in the discount rate, resulted in reduced accrued benefits. But this decrease was more than offset by poor investment returns, which caused an increase in its unfunded pension benefits. Honolulu remained in dire fiscal shape, earning it an “F” grade from Truth in Accounting.

Fast Facts

• Honolulu had $3.8 billion available to pay $6.6 billion worth of bills.
• The outcome was a $2.8 billion shortfall, a decrease of $461.7 million from the prior year, and a burden of $24,200 per taxpayer.
• Declines in the city’s pension investment values were offset by obscure changes in the way the pension liability was calculated.

Financial State of Honolulu

Honolulu’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 Burden™ of $24,200, earning it an “F” 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. The value of pension investments deteriorated, but the city’s pension liability did not increase because of changes in the way the pension debt was calculated, such as an increase in the discount rate. 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.

Honolulu had set aside only 63 cents for every dollar of promised pension benefits and 36 cents for every dollar of promised retiree health care benefits.

It is important to note that continued market fluctuations, changing investment values, decreased COVID relief funds, and a stabilizing economy that may slow tax collections, could worsen the city’s financial health. City officials should continue to try to reduce the Taxpayer Burden by following the recommendations in our 2024 Financial State of the Cities report, which would also bring greater transparency and accountability to city finances

PDF: Honolulu Report pg 72-73