New York City government, says financial watchdog Truth in Accounting (TIA), is a money mess.

Its finances are the most troubled in America, TIA charges, although dozens of other big cities in the United States also have problems.

New York’s books, TIA claims, aren’t balanced as required by law. That’s because the city doesn’t currently count all its bills, it says. For decades. the city’s leaders, TIA says, have disguised how much the taxpayers owe for pension and health care debts, called other post-employment benefits (OPEB).

We’re Fine

New York City’s leaders disagree. They say city finances are good, citing strong bond ratings.

But TIA, in its new report, “Survey of the Cities 2022,” gave the Big Apple the worst grade. It also gave bad grades to dozens of other big cities. [Financial State of the Cities 2022: News: Truth in Accounting]

“Based upon the city’s fiscal year 2020 audited financial report, New York City had a Taxpayer Burden of $71,400, earning it an “F” grade from Truth in Accounting. New York City’s elected officials have repeatedly made financial decisions that left the city with a debt burden of $204.4 billion.”

“The city,” the TIA report continued, “had set aside only 78 cents for every dollar of promised pension benefits and three cents for every dollar of promised retiree health care benefits.”

A “Real Concern”

An official of a New York City fiscal group, the Citizens Budget Commission (CBC), tells Epoch Times the city’s current budget is balanced but long-term pensions/health care funding problem is “a real concern.”

Still, CBC Deputy Research Director Ana Champeny says New York is making progress on long term budget problems.

“One of the biggest factors leading to NYC poor showing,” says Champeny, who read the TIA report, “is its postemployment benefit (OPEB) unfunded liability, which currently exceeds $100 billion.”

She adds that “this is both a function of the City’s generous retiree benefits and the lack of funding for this liability. CBC has advocated for both reducing the cost of benefits and higher funding.”

Champeny agrees New York has OPEB problems, but adds the city is on course to catch up on these debts by 2034. She also contends the city “is more than able to pay” current bills.

Others examining the spending practices of big cities like New York are skeptical.

Sheila Weinberg, TIA founder, says, “While the city is committed to wiping out the pension debt by 2034, it doesn’t negate the fact that they have a liability now. Think of it like a credit card balance. While you plan to pay it off over the coming years, it doesn’t mean you don’t have a balance now.”
No Interviews

New York City leaders say finances are sound, citing strong current bond ratings. City Comptroller Brad Lander declined interviews as did Mayor Eric Adams.

However, in previous comments and reports, Lander and other city officials point to a strong bond rating. [S&P Report – GO 5/18/2021 ( ]

“The debt and liability profile incorporates pension and OPEB funding and analysis. When we consider the city’s rating, we compare it to other municipal governments across the U.S. also rated AA/stable,”
according to the most recent S&P report.

“The AA/stable reflects many things including our view of the city’s economy, management, budgetary performance, flexibility and debt and liability profile,”

Nora Wittstruck, S&P Global primary analyst for New York City, told the Epoch Times. Moody’s also gives the city a strong bond rating.

Last year, as S&P and Moody’s affirmed the city’s healthy bond ratings, then mayor Bill de Blasio, declared the city economically healthy.

“New York City is resilient and we’re coming back strong,” he said. However, a city report shows New York could have problems in a few years.
[Standard & Poor’s Global Ratings Lifts New York City’s General Obligation Bond Credit Outlook | City of New York (]

Red Ink on the Rise

Lander, in a December report on city finances, said debt service will rise in a few years.
Annual State of the City’s Economy and Finances: Office of the New York City Comptroller Brad Lander (

“The November 2021 Plan projects debt service will consume 10.9 percent of local tax revenues in FY2022, 12.2 percent in FY2023, 12.3 percent in FY 2024, and 12.8 percent in FY2025,” Lander wrote.

The reason for higher debt, Lander wrote, is spending growing faster than tax revenue. “Debt service is projected to grow at an average annual rate of 9.3 percent from FY2022 to FY 2025 while tax revenue during this period is projected to grow 3.6 percent annually.”

How Do We Count These Bills?

Ultimately the debt debate depends on accounting systems. Cities are using cash basis accounting. Critics contend accrual accounting gives an accurate picture of an institution’s debts.

The difference between the two types is when and howe revenues and expenses are recorded. For instance, in cash basis accounting, revenue is recorded when cash is received, and expenses are recorded when they are paid, regardless of when. By contrast, in accrual accounting, the expense is recorded immediately, rather than deferred. Debts are immediately recognized.

Cities, which are legally required to have balanced budgets, generally use cash basis accounting. However, critics, such as TIA, say they should be using the more stringent accrual standard. Publicly held corporations, they note, must use accrual.

Of Cities and Corporations

Champeny says New York City is using a modified accrual standard. Privately, some TIA critics say it is ridiculous to impose strict corporate accounting standards on cities and states.

“Cities aren’t corporations; cities don’t go out of business,” one CPA privately told me as I was doing a story for the Epoch Times.

Nevertheless, Weinberg says the use of cash basis accounting and budgeting or a modified accrual accounting system misleading.

“It means that inaccurate information is used to make decisions that have economic consequences,” she told me in an interview. “If the city had to properly fund its retiree health care promises, then to balance the budget other spending might have to be cut or taxes increased. But because of bad accounting those hard decisions don’t have to be made.”

Weinberg ultimately blames government and industry groups for allowing cities and states to use poor standards. She notes that lack standards have made Illinois an economic disaster, with the taxpayers on the hook for billions of dollars of debts.

“Like Illinois, NYC uses the modified accrual basis of accounting to calculate its budget. Yes, this hybrid is an acceptable accounting basis under GASB,” Weinberg says. But she warns that “it allows a city to claim a balanced budget using that standard while the city has accumulated more than $200 billion in debt.”

GASB, which is the Governmental Accounting Standards Board, told me through spokesman Kip Betz, “we do not have any comments to share with you for the story you are working on.”

A spokesman for the American Institute of Certified Public Accountants, one of the most important accounting institutions in the nation, also declined comment.

Most elected officials and bond raters also won’t directly discuss these issues. They’ll send you reports that they say verify that the state or the city is in good fiscal shape.

Bad Accounting the Norm?

Yet TIA says bad accounting methods are used in most of the 75 biggest cities.

“Cities, in general, did not have enough money to pay all of their bills,” the report said. “Based on our latest analysis, the total debt among the 75 most populous cities amounted to $357 billion. For FY 2020, pension debt accounted for $194.9 billion, and other post-employment benefits (OPEB) totaled $164.8 billion.”

For now, New York City officials can handle these debts, CBC’s Champeny says. However, she notes that the risk of these debts requires a long-term strategy; one that reduces benefits to sustainable levels and funds them.

For instance, city money managers did well last year in pension fund investments. Their stated goal is to get seven percent a year return. In 2021, a great stock market year, the city’s pension funds earned 27 percent.

However, critics ask, what would happen in a bear market? What would happen if the market entered into a long term down market? An example of the latter would be “the lost decade” of the first decade of this century?

The issue comes down to this: Are city officials or accounting critics right about the fiscal health of New York City and dozens of other big cities?

A Pair of Accounting Critics

A few years ago, two academics looked at the budgetary practices of municipalities and states. They labelled cash basis accounting dangerous.

“The regime is misleading because it omits foreseeable long-term consequences from reported financial numbers,” wrote James P. Naugton and Holger Spamann.

“It is dangerous because the omission of consequences blinds citizens and perhaps even politicians,” they write in a UCLA Law Review article that calls for the Securities and Exchange Commission to provide oversight on the quality of city and state bonds.
[Fixing Public Sector Finances: The Accounting and Reporting Lever | UCLA Law Review]

The authors point to the gap between state pension fund assets and obligations.

“It is as if one were to balance the inflows and outflows in a checking account by drawing on a credit card. The checking account would not reveal any trouble even while large debts amassed on the credit card.”

Why, Average Taxpayer, You Should Care

Naugton and Spamann contend accrual versus cash basis accounting is more than an exotic accounting debate. The taxpayer, they write, is part of it.

“If the government,” they write, “improves its performance such that it can reduce taxes by one dollar, the citizen is also one dollar richer. As far as finances are concerned, an extra dollar earned or saved by the government and passed on through tax reductions is as useful as an extra dollar earned or saved by the business and passed on through dividends.”


Gregory Bresiger
Gregory Bresiger

Gregory Bresiger is an independent financial journalist from Queens, New York. His articles have appeared in publications such as Financial Planner Magazine and The New York Post.