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10 April 2013

Taxpayer Unapproved State and Local Government Debt: $7.3 Trillion

Steven Malanga, senior fellow at the Manhattan Institute, says that state and local governments have $7.3 trillion of hidden debt.  These debts were not approved by taxpayers, despite the fact that most state constitutions and many city charters limit borrowing and require voter approvals.
  • Illinois is rolling pension debt and state officials are being sued because they failed to disclose the debt and misrepresented it.
  • Chicago city employees retiree health care annual expenses will increase by a factor of 5 in ten years.
  • Each and every resident of Sacremento, CA is obligated with $4200 of debt they did not approve and the debt is 5.5 times the annual city budget.
  • New Jersey legislators wanted $8.6 billion for school refurbishing projects and knew voters would not approve it.  So, they set up an independent borrowing commission for the purpose.  After spending $7 billion, the commission disbanded and left the taxpayers the debt.
  • 95% of New York's $63 billion debt was never given voter authorization.
Malanga recommends that governments are forced to stop providing defined benefit pension plans.  Independent borrowing authorities must be denied and debts should only be allowed with voter approval.

The total state and local debt is mentioned twice in the article.  The first time it is mistakenly given as $7.3 billion.

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