Yes most states allow a landlord to keep the utility deposit to cover the unpaid utilities however you should check with your local landlord laws to be sure.
Damage to the property and unpaid rent can also be deducted from the utility deposit that the tenant paid.
I would personally not return a security deposit to a tenant if they left me with unpaid utilities whether it was legal or not because those unpaid utilities need to be paid and they'd likely not take you the landlord to court anyway as it may hurt them more.