Using financial statements to provide evidence on the fiscal sustainability of the states

Elizabeth Plummer (Department of Accounting, Texas Christian University)
Terry K. Patton (Department of Accounting, Midwestern State University)

Journal of Public Budgeting, Accounting & Financial Management

ISSN: 1096-3367

Publication date: 1 March 2015

Abstract

This descriptive study shows how the government-wide financial statements can be used, with adjustments, to provide evidence on a state's fiscal sustainability. We compute “adjusted total net assets” (AdjTNA), which equals a state’s assets (not including its capital assets) minus the state's liabilities and obligations, including the UAAL for pension and OPEB not reported on the Statement of Net Assets. AdjTNA provides information about a state’s ability to sustain its current fiscal structure, given its current financial resources. Primary results suggest that 40 states have a negative AdjTNA value, with a median -$6.7 billion per state (-$5,230 per household). Sensitivity analysis suggests 48 states have a negative AdjTNA value, with a median -$20.7 billion per state (-$16,200 per household). The paper discusses the important policy implications of these results.

Citation

Plummer, E. and Patton, T.K. (2015), "Using financial statements to provide evidence on the fiscal sustainability of the states", Journal of Public Budgeting, Accounting & Financial Management, Vol. 27 No. 2, pp. 225-264. https://doi.org/10.1108/JPBAFM-27-02-2015-B004

Publisher

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Emerald Publishing Limited

Copyright © 2015 by PrAcademics Press

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