A new study for the Mercatus Center at George Mason University ranks each US state’s financial health based on key fiscal 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 pension and healthcare liabilities?
Here are the state rankings:
It doesn’t take much time staring at this map to notice a pattern: Republican states appear to be more solvent overall than Democratic states. Which turns out to be the case, as noted in a recent commentary by John Merline:
“…every state in the top 10 except for Florida is solidly red, meaning those states voted for the Republican in each of the past four presidential elections. And Florida has had a Republican governor since 1999, and the state House and Senate are both controlled by Republicans.
At the other end of the spectrum, except for Kentucky, the 10 worst states are all solidly blue. And all but two of the governors since 1947 have been Democrats.”
Merline’s table pretty much says it all:
Next: Fairness, Fiscal Solvency, and Tax Codes
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References:
Ranking the States by Fiscal Condition 2016 by Eileen Norcross and Olivia Gonzalez https://www.mercatus.org/statefiscalrankings Accessed on 2/4/2017
Commentary: Best-Run States Are Heavily Republican, Study Finds by John Merline http://www.investors.com/politics/commentary/best-run-states-are-heavily-republican-study-finds/ Accessed on 2/4/2017