There's a group here in Illinois that is making the same calculations as the group State Budget Solutions and is finding an incredible difference between what the politicians say their deficit is and the "real" deficit when you include all liabilities.
The nonprofit State Budget Solutions combined states' major debt and future liabilities, primarily for pensions and employee healthcare, unemployment insurance loans, outstanding bonds and projected fiscal 2011 budget gaps. It found that in total, states are in debt for $4.2 trillion.
The group, which follows state fiscal conditions and advocates for limited spending and taxes, said the deficit calculations that states make "do not offer a full picture of the states' liabilities and can rely on budget gimmicks and accounting games to hide the extent of the deficit."
The housing bust, financial crisis and economic recession caused states' tax revenue to plunge, and huge holes have emerged in their budgets over the last few years. Because all states except Vermont must end their fiscal years with balanced budgets, states have scrambled to cut spending, hike taxes, borrow and turn to the federal government for help.
Taxpayers are worried the states' poor fiscal health will persist for a long time and some Republicans in Congress have questioned whether the situation is worse than the states say.
The problem with hiding the true size of the deficit is that eventually, the piper has to be paid. When that happens, taxpayers around the country are going to be in for a very rude awakening. I imagine they will not be pleased at the prospect of a doubling or even tripling of taxes. But unless the debt is simply written off - a possibility - and pensions go unpaid, states will have little choice but to squeeze the shortfall out of taxpayers.