Rhode Island is the 7th Most In-Debt State in America
Thursday, October 27, 2011
Rhode Island has the seventh highest debt per capita in the country according to a new study conducted by State Budget Solutions (SBS), a nonprofit organization that advocates for fundamental reform of state budgets.
The study found that the combined debt of all the states exceeds $4 trillion, with Rhode Island on the hook for $19,497,824, or about $18,524 per capita. Only Alaska, New Jersey, Connecticut, Hawaii, Illinois and Ohio owe more when it comes to debt per capita.
Overall, the larger states (California New York, Texas) owe the most money, with each state having debt that totals more than $280 billion. In total, nine states owe more than $100 billion.GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST
The organization defines total state debt as the sum of outstanding official debt, pension and other post-employment benefits (OPEB) liabilities, Unemployment Trust Fund loans, and current budget gap.
Bob Williams, President of State Budget Solutions, said the numbers prove that if state lawmakers across the country can’t reform their ways, the country will face an unprecedented budget crisis. He said many states haven’t accurately assessed their debt.
"These deficit numbers are staggering and should be frightening to the American public. Due to budget gimmicks, many states fail to give an adequate picture of how much trouble they are really in," Williams said. "This report makes it clear that if legislators don't act immediately and decisively, our country will be facing a budget crisis that we have never seen before."
Pension Reform Addresses Debt
Rhode Island is no stranger to the debt conversation. The state slashed social service spending last year as a way to help plug a $300 million budget deficit and now the General Assembly is in a special session to address the pension system, which General Treasurer Gina Raimondo says is crippling the state.
Raimondo and Governor Chafee have proposed legislation that will raise the retirement age, switch to a hybrid 401k-style plan and freeze cost of living adjustments (COLAs) until pension plans are 80 percent funded. For teachers and state workers, that could mean going 19 years without a raise.
But Dr. Ed Mazze, Distinguished University Professor of Business Administration at the University of Rhode Island, says the state is on the right track thanks to the legislation.
“Rhode Island's debt per capita is high for a number of reasons such as the liabilities created by unfunded state and municipal pension and health benefit programs which have been put on the back turner for numbers of years,” Mazze said. “We now are preparing to make the changes necessary to reduce this huge deficit of over $13 billion by making changes in investment assumptions and raising the retirement age along with legislation introduced by the Governor and General Treasurer.”
Mazze said the fact that Rhode Island falls inside the top ten of total state debt is no surprise.
“These changes will reduce the deficit by billions of dollars,” he said. “In addition, Rhode Island has had double-digit unemployment in the last two years making it necessary for the state to borrow money from the Unemployment Trust Fund to pay unemployment benefits. The state has also issued bonds in anticipation of tax revenue and for infrastructure projects. Adding this together puts Rhode Island in the unenviable top ten when it comes to state debt. Another list where we are in a bad place.”
Time for Action is Now
On the opposite end of the list, Nebraska, Tennessee, Indiana, Florida and Idaho have the lowest per capita debt in the country, with each owing less than $8,000.
Williams said each state needs to address its problems individually. And, he said, it needs to happen right away.
"The time for action is now,” Williams said. “Our country cannot afford to continue to recklessly spend while passing trillions in debt to future generations. State Budget Solutions urges state legislators to take responsibility for their own state's deficit and begin implementing real solutions to fixing this growing problem.”
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