Policy Points: Pennsylvania’s Debt Burden
State and local debt levels have exploded since 2002. When combined with the commonwealth’s unfunded liabilities, total state obligations exceed $17,600 for every Pennsylvania resident. This burden could grow even heavier, as Pennsylvania may need to borrow from an outside lender just to pay its bills for the 2017-18 fiscal year.
- Pennsylvanians owe more than $134 billion in state and local government debt. This equals $10,509 for every man, woman, and child in the state, or $42,036 for the average family of four. Since 2002, total debt has risen by 52 percent.
- The totals below include debt in the form of government bonds but exclude unfunded pension and other post-employment benefits (OPEB) for current and retired public sector employees.
- The commonwealth’s two pension plans—the Public School Employees’ Retirement System (PSERS) and the State Employees’ Retirement System (SERS)—carry more than $71 billion (market value) in unfunded liabilities.
- Post-employment benefit liabilities, which include retiree health, dental, life, and disability insurance, are often overshadowed by pension costs. Yet, at more than $20 billion, they represent a large expense for taxpayers.
- In total, taxpayers are on the hook for nearly $92 billion in unfunded public employee benefits. This amounts to $7,178 for every single person in Pennsylvania.
- Total Pennsylvania state debt increased from $23.1 billion to more than $52 billion in the last nine years—representing a total state-level increase of 125 percent.
- Since 2002, total outstanding state general obligation debt has increased by 97 percent, from $6.8 billion to $12.3 billion.
- Annual debt payments on general obligation bonds increased from $349 million in FY 2002-03 to more than $1.1 billion in FY 2016-17—an increase of 218 percent. This exponential increase in debt service has made the Department of Treasury the fastest growing department in the state over the last 15 years.
- More than three-fourths of Pennsylvania's state-level borrowing is done by off-budget state agencies and authorities, like the Turnpike Commission and the Commonwealth Financing Authority. These separate entities have the power to issue their own debt to the extent authorized by the legislature.
- Debt held by state agencies and authorities jumped from $16.8 billion in 2002 to nearly $39.7 billion in 2016—an increase of 135 percent.
School District Debt
- In addition to state debt, Pennsylvania’s taxpayers are also on the hook for debt at the school district level. According to the Pennsylvania Department of Education, school district debt increased by 57 percent from about $20 billion in 2002 to $31.4 billion in 2016.
County, Municipal, Township, & Special District Debt
- Local government debt—debt held by counties, cities, townships, boroughs, and special districts—represents more than 40 percent of all taxpayer debt in the commonwealth.
- Per the U.S. Census Bureau's most recent data, county, municipal, township, and special district debt increased from $45 billion in 2002 to approximately $51 billion in 2014.
- Representative Stan Saylor has introduced House Bill 785, which would reduce the total amount borrowed by the commonwealth.
- The bill lowers the debt ceiling on the Redevelopment Assistance Capital Program (RACP) to build on the work of a similar reform passed in 2013.
- HB 785 also places a cap on new borrowing for RACP and public improvement projects—both of which comprise about 43 percent of the state’s gross debt service.
- HB 785 has advanced to the Senate, where it could be improved to include stronger reforms such as the following:
- The elimination of RACP—a program that benefits the politically connected at the expense of all taxpayers
- Stricter limits on new borrowing for public improvement projects
- Lawmakers may also require a supermajority to approve the issuance of any new state debt.