PA Middle of the Road in Transparency

(The Center Square) – A new study reviewing the financial transparency of state governments across the country puts Pennsylvania in the middle of the pack, tied with five other states for seventh place out of 50 states.

The research, conducted by the Chicago-based nonprofit Truth in Accounting, aims “to encourage the publication of transparent and accurate government financial information” by developing a transparency score for each state based on a variety of factors.

“This report focuses on important-but-obscure annual financial reports on file in statehouses across the country and measures their contents against widely accepted best practices from the private sector,” Truth in Accounting reported

The Financial Transparency Score Report uses a 0-100 scale to give taxpayers an easy to understand benchmark of how timely, truthful and transparent each state is with financial reporting. The study was conducted using data for fiscal year 2020, the most recent year available for all 50 states.

Truth in Accounting considers any total transparency score over 80 as “noteworthy.” The group’s analysts gave Pennsylvania a total transparency score of 82. Last year it was 83.

The research is broken down into eight categories with different points available for different issues. Pennsylvania received 50 out of 50 points for receiving a clean opinion from an independent auditor, but only three out of 10 points for “a net position not distorted by misleading and confusing deferred items.”

The state’s finances received six out of 10 points for reporting all retirement liabilities, and seven out of 10 points for publishing a timely report. Researchers gave Pennsylvania a score of four out of five points for the online accessibility of the financial report, and a five out of five for navigation, which means the state report is “searchable with useful links from the table of contents and bookmarks.”

Pennsylvania also received a score of five out of five for using an independent auditor who is not an employee of the government. In the final category, on whether the state uses the same date for net pension liability as the annual report, Pennsylvania scored two out of five points.

Truth in Accounting CEO Sheila Weinberg told The Center Square that Pennsylvania lost points for using prior year pension numbers, a combined $18 billion in assets and liabilities in confusing “deferred inflows and outflows” accounts, and the way officials report liabilities for the Public School Employees’ Retirement System.

“The liability for that plan is $49 billion, the state said less than 1 percent of that is a state liability,” Weinberg said, adding that the state has funded 50 percent since 2009 and continues to do so. “We believe 50 percent of that should be on (the state) books. We believe they’re about $25 billion short.”

In the Mid-Atlantic region, the Keystone State ranked better than New Jersey’s score of 72 and Delaware’s score of 79, but behind Maryland at 87, Virginia at 85 and West Virginia at 84.

Other states tied with Pennsylvania at 82 include Mississippi, Indiana, Kansas, Rhode Island and Vermont. Utah received the top score of 88, while Colorado was ranked last at 46.

“Overall the 50 states’ transparency scores worsened compared to the previous years,” according to the report. “Every state received funds from the CARES Act in response to the COVID-19 pandemic, which highlighted weaknesses that existed in states’ unemployment insurance.

“These weaknesses caused several states to receive poor audit opinions. Other factors preventing states from receiving better scores include timeliness in reporting and the use of outdated pension information.”

Weinberg said Pennsylvania officials already are working on improving the score for next year.

“Someone from the state treasurer’s office called to ask if they could review the score and figure out a way to get a better score,” she said. “That’s a positive step.”