A new report from government watchdog Truth in Accounting paints a stark picture of the financial health of America’s largest cities, finding that none of the five biggest municipalities had enough money on hand to pay all of their bills at the end of fiscal year 2024.
The Financial State of the Cities 2026 report, released this week, analyzes the most recent audited Annual Comprehensive Financial Reports from Los Angeles, Houston, Philadelphia, Chicago, and New York City. The nonpartisan nonprofit examined whether each city could cover both its current expenses and long-term obligations, including pensions and retiree health care benefits.
According to the report, all five cities fell short, posting a combined unfunded balance of roughly $240 billion.
Truth in Accounting uses a standardized approach to assess municipal finances, including a metric known as the Taxpayer Burden
, which estimates how much each taxpayer would owe if a city were required to pay off its accumulated obligations immediately.
Los Angeles ranked best among the five cities, though it still reported a shortfall. The city ended fiscal year 2024 with a $1.8 billion gap between its available assets and total obligations, resulting in a Taxpayer Burden of $1,300 per taxpayer. Los Angeles received a “C” grade, reflecting relatively stronger pension and retiree health care prefunding compared with other major cities.
Houston followed closely behind, reporting a $3.5 billion shortfall and a Taxpayer Burden of $4,800 per taxpayer, also earning a “C” grade. While Houston’s financial condition improved during 2024, the report cautioned that unrealized investment gains and largely unfunded retiree health care benefits continue to pose long-term risks.
Philadelphia ranked third, with a $9.4 billion shortfall and a Taxpayer Burden of $17,000 per taxpayer. The city received a “D” grade. The report noted that Philadelphia exceeded its actuarially determined pension contribution in 2024, but its retiree health care benefits remain significantly underfunded.
Chicago ranked fourth, reporting a $41.1 billion shortfall and a Taxpayer Burden of $42,600 per taxpayer. The city received an “F” grade, with the report pointing to severely underfunded pension systems and recurring budget shortfalls as major drivers of its financial strain.
New York City ranked last with the largest gap. The report found a $184.6 billion shortfall between available assets and total obligations, translating into a Taxpayer Burden of $61,700 per taxpayer and an “F” grade. While New York City fully funds its annual pension contributions, retiree health care liabilities were identified as a significant and growing long-term obligation.
All five cities operate under balanced budget requirements, but Truth in Accounting noted that these rules exclude long-term liabilities, allowing billions of dollars in obligations to accumulate outside the budget process.
Founded in 2002, Truth in Accounting says its analysis is designed to give taxpayers, policymakers, and journalists a clearer picture of municipal finances by highlighting costs that are often left out of traditional budget discussions. The organization is led by Sheila Weinberg, a certified public accountant with more than four decades of experience.
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