America's red ink runs much deeper than you think.
Aside from the nearly $18 trillion national debt, many state governments are looking at future budgets that are trillions of dollars in the red. And they've hidden the numbers by dramatically under-reporting that debt, according to a new report by the think tank State Budget Solutions.
The group looked at what are known as "unfunded liabilities" -- or debt states will owe down the road. It found a number of states are fudging their numbers -- big-time -- using tricks like assuming their stock investments will soar.
The book-cooking could mean bad news for public pensions and other programs that rely on these budgets. The report finds that, nationwide, states have unfunded liabilities of nearly $5 trillion, or $15,000 per American (even though the states allegedly low-ball that number at $2.7 trillion).
“They’re making promises that they can’t keep,” Joe Luppino-Esposito of State Budget Solutions told FoxNews.com.
Illinois was one of the worst offenders, according to the report. It found that while the state says it has an “unfunded liability” of $8,133 per person, the true amount is three times higher at $25,740 per Illinois resident.
“Public pensions assume they will make 7-8 percent every year. Obviously, they don't. That, combined with states that aren’t putting as much money as they promised into pension plans, causes many states to be in a huge liability hole,” Luppino-Esposito said.
Other states have similar problems. For instance, California says it has an unfunded liability of $4,909 per person, but according to the report it is nearly $20,000.
While the numbers may seem abstract, Luppino-Esposito warned they will affect people’s lives.
“State governments are telling their employees that they are going to get paid a particular pension when they retire. But the numbers show that that’s not going to happen,” he said.
While many states are in trouble, Luppino-Esposito said Illinois is in the worst fiscal shape.
But Illinois state officials claim the state has plans to get back on track. “We did pass a big pension reform bill in December that -- if the courts uphold it -- will address the lion’s share of our pension problems over a 30-year cycle,” Assistant Budget Director of Illinois Abdon Pallasch told FoxNews.com.
He added that the state had begun to reduce its expectations for its investments. “The Illinois Teachers Retirement System just lowered theirs a half point from 8.5 percent to 8 percent,” he noted.
Yet no pension plans are meeting those rates of return in today’s economy.
Many say the solution is for governments to switch to the more common private-sector model of 401k-style plans, in which the retirement money is invested up-front rather than based on projections of future investment performance.
“The state governments seem to have the assumption that they will be able to just keep grabbing money for as long as they can,” Luppino-Esposito said. “But the reality is they can only tax so much before it stops bringing in more revenue.”
Pallasch said the problem goes far beyond Illinois.
“It is not just Illinois. The only reason it is more here than in California and other states is we have more outstanding pension debts. But this concern would apply universally,” he said.