from – Mercatus Center at George Mason University – by Eileen Norcross
A new study for the Mercatus Center at George Mason University ranks each US state’s financial health based on short- and long-term debt and other key fiscal obligations, such as unfunded pensions and healthcare benefits. This 2016 edition updates the version the Mercatus Center published in 2015. Using the approach pioneered in 2015, the 2016 edition presents information from each state’s audited financial report in an easily accessible format, this time including Puerto Rico to provide a benchmark of poor fiscal performance.
Growing long-term obligations for pensions and healthcare benefits continue to strain the finances of state governments, highlighting the fact that state policymakers must be vigilant to consider both the short-term and the long-term consequences of their decisions. Understanding how each state is performing in regard to a variety of fiscal indicators can help policymakers as they consider the consequences of policy decisions.
The study also highlights some of the limits of the financial data reported by state governments. States release these data years after they are most relevant, and because the information is highly aggregated, analysts and the public have difficulty discerning the true fiscal position of any state.
SUMMARY AND KEY FINDINGS
The financial health of each state can be analyzed through the states’ own audited financial reports. By looking at states’ basic financial statistics on revenues, expenditures, cash, assets, liabilities, and debt, states may be ranked according to how easily they will be able to cover short-term and long-term bills, including pension obligations.
This ranking of the 50 states and Puerto Rico is based on their fiscal solvency in five separate categories:
- Cash solvency. Does a state have enough cash on hand to cover its short-term bills?
- Budget solvency. Can a state cover its fiscal year spending with current revenues, or does it have a budget shortfall?
- Long-run solvency. Can a state meet its long-term spending commitments? Will there be enough money to cushion it from economic shocks or other long-term fiscal risks?
- Service-level solvency. How much “fiscal slack” does a state have to increase spending if citizens demand more services?
- Trust fund solvency. How much debt does a state have? How large are its unfunded pen-sion and healthcare liabilities?
TOP FIVE STATES
Alaska, Nebraska, Wyoming, North Dakota, and South Dakota rank in the top five states.
- Pensions and health care will continue to be long-term challenges. While these states are considered fiscally healthy relative to other states because they have significant amounts of cash on hand and relatively low short-term debt obligations, each state faces substantial long-term challenges related to its pension and healthcare benefits systems.
- Unpredictable revenue sources may play a role in short-term fiscal health. The top-performing states owe some of their success to unpredictable revenue sources. Since the most recent data is from fiscal year 2014, it appears as though these states are very well off, but declining oil prices and the budget crises that are currently unfolding in Alaska and other oil-producing states highlight the danger of expanding revenue based on volatile revenue sources.
- The top five states have changed since last year. Wyoming moved from sixth place last year to third place this year, pushing Florida out of the top five. The four remaining states were in the top five last year, but this year Nebraska moved to second place, demoting North Dakota and South Dakota.
BOTTOM FIVE STATES
Kentucky, Illinois, New Jersey, Massachusetts, and Connecticut rank in the bottom five states, largely owing to the low amounts of cash they have on hand and their large debt obligations.
- Each state has massive debt obligations. Each of the bottom five states exhibits serious signs of fiscal distress. Though their economies may be stronger than Puerto Rico’s, allowing them to better navigate fiscal crises, their large liabilities still raise serious concerns.
- Unfunded liabilities continue to be a problem. High deficits and debt obligations in the forms of unfunded pensions and healthcare benefits continue to drive each state into fiscal peril. Each holds tens, if not hundreds, of billions of dollars in unfunded liabilities—constituting a significant risk to taxpayers in both the short and the long term.
- The bottom five states have changed since last year. Kentucky’s position has declined, placing it in the bottom five this year. New York is no longer in the bottom five. New Jersey and Illinois improved slightly, but remain in the bottom five. Connecticut and Massachusetts also remain in the bottom five, in slightly worse positions than last year.
BIG MOVERS
To be considered a “big mover,” a state must have shifted position by more than five spots between the 2015 and 2016 editions (which use the latest available data, from fiscal years 2013 and 2014, respectively). A change in ranking of five or fewer places is not considered a significant change in the underlying metrics.
For the most part, states’ overall fiscal performance remained relatively constant. Only Delaware and Iowa dropped significantly in the overall ranking of fiscal condition. But there were big movers in each of the five categories that make up the overall ranking:
- Colorado, Delaware, New Mexico, and Iowa all moved down in the ranking of cash solvency, while Maine and Minnesota both improved.
- Sixteen states changed their ranking within the budget solvency category; six improved significantly and ten worsened. (Budget solvency is more prone to large changes in ranking than the other categories because of the fluctuation in surpluses or deficits from year to year.)
- Two states—Maine and North Carolina—experienced a significant shift in their long-run solvency ranking. Maine fell by eight spots and North Carolina improved by seven spots.
- There was little movement in the service-solvency ranking, except in the case of North Carolina, which improved its position by six places.
- Colorado and Arizona both improved their trust fund solvency ranking. Montana, New Jersey, and Washington moved down in this ranking.
Updating the fiscal condition of the states with another year of data shows that most states’ fiscal performance remains relatively constant, but the signs of fiscal stress persist. Underfunded pensions and healthcare benefits continue to put pressure on state finances. Even states that appear to be fiscally robust—perhaps owing to large amounts of cash on hand or revenue streams from natural resources—must take stock of their long-term fiscal health before making future public policy decisions. These fiscal pressures point to areas for policymakers to direct their efforts. They also highlight areas where improved financial reporting could give the public a clearer picture of states’ fiscal health.
The most highly taxed Democrat Bastion of California is one of the least fiscally solvent. There is a message here, folks. The Democrat policy of free lunches and handing out candy must stop NOW. It starts with Conservative Leadership. The free spending California Liberals in Sacramento and the Congress need to be thrown out of office. This process can start on November 8, 2016.
Sadly this does not break out the amount of debt dumped on each state by the federal governments program of pushing illegal immigrants onto various states to feed, house, school, etc. Many states have had unexpected large burdens in recent years that was not of their choosing.
When and if Illinois finally gets rid of Mike Madigan as house leader (after 31 years of destruction) it will quickly start up the list as one of the better run states. With Madigan at the tiller, this state is doomed to be at the bottom of list list forever!
Unfunded liabilities continue to be a problem and will continue as long as public employees remain unionized and refuse to reduce retirement benefits which exceed almost all others citizens. They have become the privileged few.
Thank you Mr. Malloy and the rest of the loser Democrats for moving the once-Great State of Connecticut to spot number 50 on the list of the most overall insolvent state in the nation. It’s now official in the new study from Mercatus Center. Hope your all real proud of yourselves. Frankly, with all of your reckless spending and give-aways, I’m surprised it didn’t happen sooner. Thanks again, LOSERS.
The dumacrats rob the store and mismanagement the business so bad in their quest to buy votes, that when the Republicans get back in power they have to stop all of the entitlements to become solvent again. Then the dums through their press toadies make it look like the Republicans are cruel and evil for hurting the poor by taking away the freebies, or not increasing them. It is all about personal power and wealth for the dumacrats, not the people that they claim to love and care so much about. If the poor (kept poor by the dums) ever started to do well and make money, they would no longer vote for the dumacrats!!!!
Iowa was rated by another survey as being 8th in the nation for fiscal solvency-strength. We are required by law to have a balanced budget every year, using only 99% of projected revenues, with the remaining 1% put into a Rainy Day Emergency Fund to cover shortfalls after the budget is set to cover govt expenses. If the governor cuts back the state budget after the budget is approved, he must either have the Legislature come back to do it or make unilateral, across-the-board cuts to all spending areas. The rainy day fund use and A-T-B cuts were done by 2 DEM governors, 3 times by Vilsack, and once by Culver. Republican Governor Branstad brought the law in 1992 through negotiations with the DEMs and never used it, but only filled the RDEF coffers. If people study the state fiscal issues carefully, you will see it is DEM leadership that has caused such a mess, and the only hope is conservative Republican leadership that pull it upright.
I have a Question – China has total Gun Control – but since 2000 China has had 20 mass killings – According to Obama and Hillary Gun control will stop Mass Killings – Why has it not worked in china?
Because China isn’t importing Trashy Musloms.
In God We Trust
U.S. Code Title 18, Section 2071
So Much Wrong and So Few Seem to Care
From the Cornell Law Library
Former United States Attorney General Michael Mukasey tells MSNBC that not only is Hillary Clinton’s private email server illegal, it “disqualifies” her from holding any federal office.
Such as, say, President of the United States. Very specifically points to one federal law, Title 18. Section 2071.
For those of us who do not have United States Code committed to memory, here’s what it says:
“(a) Whoever willfully and unlawfully conceals, removes, mutilates, obliterates, or destroys, or attempts to do so, or, with intent to do so takes and carries away any record, proceeding, map, book, paper, document, or other thing, filed or deposited with any clerk or officer of any court of the United States, or in any public office, or with any judicial or public officer of the United States, shall be fined under this title or imprisoned not more than three years, or both.
(b) Whoever, having the custody of any such record, proceeding, map, book, document, paper, or other thing, willfully and unlawfully conceals, removes, mutilates, obliterates, falsifies, or destroys the same, shall be fined under this title or imprisoned not more than three years, or both; and shall forfeit his office and be disqualified from holding any office under the United States. As used in this subsection, the term “office” does not include the office held by any person as a retired officer of the Armed Forces of the United States.”
Yes, it explicitly states “shall forfeit his office and be disqualified from holding any office under the United States.”
Shouldn’t voters know that? The media won’t tell them. So it’s up to us. Can you help hold Hillary accountable? Pass this on, please.
Now !! Does anyone believe that this will make a
Unfortunately LC, Michael Mukasey, admitted he was incorrect when he sent a very gracious e-mail on 8/25/15 to say that, “on reflection, … Professor Tillman’s [analysis] is spot on, and mine was mistaken…. The disqualification provision in Section 2071 may be a measure of how seriously Congress took the violation in question, and how seriously we should take it, but that’s all it is.”
Basically, Prof. Tillman states that a statute (18 USC 2071) cannot supersede, add to or subtract from, the requirements established in the U.S. Constitution in
art. II, § 1, cl. 5, and amend. XII. Again unfortunately, I believe Prof. Tillman’s analysis is correct.
PLEASE DO! THANKS.
That is a prime example that gun control does NOT work.
even IF gun control would work in these instances
1) you do not gut the constitution because you lose a couple of hundred people a year(out of a population of 300 million)
2)if you are serious about these killers you DO NOT BRING THEM INTO THE COUNTRTY-and guns will stop being such a problem
same people doing the killing over there as over here-Muslims(and most of their killings are done with KNIVES, not guns)
Where do I find data on the state of California?? It is certainly not in a sound financial position and compared to other states, its size and population ought to give its data more weight. Somebody please enlighten me.
I’m pretty sure much of the data is based on per capita debt. With California being so large its debt per citizen might not be as bad as Connecticut that has the highest per capita debt (I live in CT). CT can’t stop spending as the dems have such a lock on the legislature, senate and governorship they can act unilaterally.
As Carl said if the calculation is per capita, especially if they also counted all of the illegal immigrants.
Besides fiscal solvency, my home state Wyoming, also has a another distinction, firearms friendly. You can carry either open or concealed without big brother’s permission. It seems firearm friendly goes along with sound monetary policies.
But am I happy with Wyoming’s fiscal solvency, no it could be better. We have politicians like other states and most like to spend other people’s money.
At a time where very few companies provide pensions, our states and federal government must getc out of the pension business as it passes the debt to our children. Rather, like most companies, offer Roth IRA 3% matches on the first $10,000 an employee saves each year that the state is within budget and zero when the state is not. Same for Federal government positions. The gravy train must stop.
Here in Illinois I knew a state politician one time he slipped up and told me one more year and I get a vested pension of 103% of my salary. I asked how do you get away with making more not working then working? He laughed we make the laws. Wonder why Illinois is broke there are so many double dippers in this state getting two pensions.
Percentage wise, how many of the states are run by Liberal Democrats?
Look at the map – most of the “Below Average” states are solid blue states.
There could also be a correlation with “Right to Work” states — up to 25 of them now, I think. People that like to keep their hard-earned dollars instead of shelling out for union officials with cushy jobs and expense accounts, and political causes they don’t agree with, such folks might run their state governments a little better than the rest, too.
Kentucky elected a new Republican governor, whose first priority is to fix the state pension hemorrhage. He has of course ticked alot of Democrats off, but they are mostly responsible for the bleeding. Hopefully by the end of his first term, Kentucky can move out of the bottom five. Go Matt, keeping cutting those entitlement cords.
About 15 yrs ago I heard a comment from a radio talk show host: “Show me a city run by a Democrat, and I’ll show you a city in red ink.” —seems to be accurate, and also to hold true for states and our country as a whole. The elephant in the room when it comes to politics is the national debt. Not addressing it is going to lead to catastrophic events. The huge pensions for govt workers is not sustainable, neither is healthcare spending. We need less regulation, fewer govt workers, making less money and with smaller pensions. Also, we don’t have a healthcare system, we have a “disease care” system. In a true “healthcare” system the majority of money would be going towards prevention i.e.personal health education, nutrition, exercise, manual therapy etc, and not into drugs and surgeries, where it is currently being spent. Prevention is so much more cost effective. (I’m an independent and no fan of the republicans as for the most part they seem to have sold out their constituents in order to get re-elected. many have had it with politicians) (I live in Pennsylvania)
Because like chicago run by democrats they spend the tax dollars on minorities and illegals (which are really trespassers to enter one’s land uninvited) to lock up their vote and stay in power.
Not sure how old your data is but Alaska is far from solvent. Our economy is based on oil which is going down in both cost and production. Our legislature has been in regular and now special session since January and they can’t establish a budget. We do have the Permanent Fund but they are trying to raid that. If things don’t settle down soon we will be broke! Our Court System is going to cut back hours and close at noon on Fridays; other State agencies will probably have to do the same. This means employees on furlough and losing about 4% of their pay. I know of several people who are planning to move out of state if things don’t get better. Legislators are in a big tax mode and want either an income or a sales tax (those of us who work or have been responsible want a sales tax that will effect everyone—not just workers). Our fiscal year ends 6/30 and we have no idea what is going to happen.
Moving from my native California with no regrets. It use to be a great state but finding a smooth road is nearly impossible and continued benefits for illegals and pay increases for the legislature will drive it into the Pacific Ocean. Looking forward to starting a new adventure in conservative Idaho where they are required to balance the budget annually. Cost of living outside of California is at least 30% lower.
Agreed! I am looking for a state to move to. Illegals get more benefits here than citizens.
I had to leave the People’s Republic of NY. I never looked back. Taxes are way down, car insurance is down, housing is cheaper and you can get a mansion for what you paid for a house in NYC. The people are kind and courteous and they speak English! Good luck to you.
My wife and I are making reservations on the same wagon to Idaho at the end of 2016 when she retires (early), “with no regrets” even as native Californians. The “Where to Retire” magazine ranks City to City moves for From / To states, With a move from Los Angeles Ca. to Idaho Falls Id; at a 40 percent lower overall cost differential. I understand the variables, but this article just confirms that we will be making a good move, to a ‘Top of the List’ average state, even if the savings rests at 25 percent depending on what city we choose. We really don’t like moving from our beautiful, home State. But our health, safety and fiscal longevity make it imperative.
Stated should get out of the pension business. Offer 401 or similar plans to augment SS. The states do not put pension money aside the year incurred as they should.
I was pretty sure that passing ACA would be a fiscal disaster for the USA-turns out to be the case as costs for this continue to rise. When the govmt runs something like this there is more waste, more regulations Etc. Based my opinion on my observations and medical people I know. It didn’t take long to find out that Obama Would give away so much money to others to bankrupt us while not taking care of our homeland.
I saw a news report a couple days ago stating that the ACA costs would increase by 27% next year. That will put the base rate for a silver plan for my wife and I at well over $1100 per month. That is for 2 perfectly healthy people. In addition, we have been trying to get our healthcare straightened out for 9 months now. We get signed up for a month or two, and then get kicked out due to various mistakes by the exchange. We get signed up again, then kicked out again. The exchange has no idea what the insurers require, and the insurers have no idea what the exchange does. A continual nightmare of red tape.
Perhaps you should look into healthcare sharing ministries( approved by Obamacare) that radically lower than most insurances, with much lower “premiums”. There are about 5 out there, and must by law be in existence from 1999 or older. Here’s a short list of ones I remember: Liberty HealthShares, Medi-Share, Christian Healthcare Ministries, Samaritan Ministries. Hope this info can help you and others.
North and South Dakota came as no surprise for me. But now that “Rockin’ the Bakken” shale oil bonanza has cooled off with significantly lower global oil prices, that trend may not continue.
Unrelated Comment: Please bring back Fran Tarkington’s leadership and business column. I used to look forward to reading it with each AMAC newsletter.
Send us your “tired of craziness” citizens. Send us your “hard working honest, straightforward” citizens. ND & SD will put them to work and allow them to get back to being ‘real people’. They will enjoy cursing hard winters, singing with beautiful springs, sweating in hot short summers, and reveling in fabulous autumns. They will enjoy stepping back in time and connecting with the earth and all it’s goodness, while being connected with all the present and future technology they wish to. They can continue their education at the many universities available or enjoy sitting at the corner cafe with new friends. Either, way you go – big city or small town, take your pick. Personally, I call SD “Camelot”.
Sounds like the America we all once knew.
I once had a pastor who, in his younger days, enlisted in the Air Force. Somebody in the military must’ve have had a twisted sense of humor, sending a warm-blooded Southern boy up to some AF base in North Dakota, refueling planes out on a tarmac in what had to be some very harsh winter conditions.
Thank you for the invitation to migrate your fair Dakotas, but you probably don’t want too many folks to take you up on it, or it will not be your “Camelot” any longer.
That sounds like Iowa! Overall, the Upper Midwest is a wonderful place to live and raise a family. In fact, as my Father told me many years ago, all the crazies from Europe and Asia hit the east and west coast first, ruining them, and migrating to the Midwest. We have a lot of wonderful places to live in security and peace, with good neighbors who look out after each other, and lakes for the grandkids to enjoy.
Isn’t it significant that most of the states in Financial trouble are liberal run states. give Hillary a chance and she will add the conservative states. The most liberal, The highly liberal states, California, Massachusetts and Connecticut are disaster states..
The people who work and pay taxes are leaving illinois in droves. This whole country has become the land of the parasite and home of the freeloader.
Don’t leave my long-ago home state of Illinois out of that list. completely liberal, completely greedy and completely out of other people’s money.