Half of U.S. States (Inofficially) Spend More Than They Make

Calculations made by think tank Truth in Accounting show that around half of U.S. states do not have a balanced budget, meaning they spend more than they bring in every year. The most surprising aspect about this finding is that just four states reported this on their official balance sheets for fiscal year 2025, Truth in Accounting’s latest Financial State of the States report says.

While many states have an obligation to present a balanced budget (but still can’t seem to find a way to actually make ends meet), many more also submit financial reports that understate spending, overstate income or both. According to the analysts, the most common mechanisms to balance a budget that isn’t are excluding certain costs or shifting them into the future as well as ignoring deficits acquired in previous years. Another thing that can make a budget seem more balanced is estimating costs for the upcoming year too conservatively. As state budgets are to a large degree displaying an expectation of costs for the fiscal year ahead, a balanced budget can quickly become off kilter if realistic estimations are not made.

The report’s data shows that states that are rated positively in terms of budget balancing are found in the northern United States, although not exclusively. Income from the exploitation of natural resources aids state incomes majorly in places like Alaska, North Dakota, Wyoming and Montana as well as in West Virginia and Oklahoma. But the writers also mention that it matters how well states invest wealth derived from their industries to compound their incomes.

Other states doing well budget-wise owe this to their diversified and expanding economies and growing populations, as is the case for Utah, Tennessee, Idaho and North Carolina. Some states also bank on a combination of a few well-oiled industries in combination with fiscal restraint, for example Iowa, South Dakota, Nebraska or Arkansas.

Red states are much more numerous among those having a large surplus, as they focus more on conservative spending and less on offering additional government and social services. There are exceptions here as well, including Texas and Ohio, which were rated as in a deficit largely due to big pension obligations.

Among the states with the largest deficits are prominent blue states, including New York, California and Massachusetts. However, Southern states Louisiana, Alabama and Mississippi are also listed as deep in the red. What these and many other states struggling with their budgets have in common are the aforementioned pension (and retiree healthcare) obligations or rather their promise without setting enough money aside in time to service them. Very large problems in these areas exist in Illinois and New Jersey, the latter exhibiting the largest shortfall in the report at almost $46,000 per taxpayer. The biggest surplus is meanwhile found in North Dakota at a whopping $72,300 per taxpayer.

Despite many spending obligations, Oregon is a state that bucks the trend by achieving a budget surplus of $5,800 per taxpayer. The state accomplishes this by high taxes as well as good economic activity and sound investing. Minnesota runs an even bigger surplus of $6,300 per taxpayer and covers its obligations and more by relying on its broad tax base and productive, diversified economy as well as accounting practices like revenue forecasting.