Eileen Norcross and Olivia Gonzalez of the Mercatus Center at George Mason University recently ranked US states according to their fiscal solvency. Norcross and Gonzalez based their ranking on 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 large are each state’s unfunded pension and healthcare liabilities?
Meanwhile, the National Conference of State Legislatures released a report on the partisan composition of state legislatures as of November 8, 2017. I figured that state legislatures are largely responsible for the fiscal health of their states and was curious how the state fiscal rankings matched up with the political composition of their legislatures. This is what I found:
Sources: State Fiscal Rankings 2017 Edition /Eileen Norcross & Olivia Gonzalez; Mercatus Center at George Mason University https://www.mercatus.org/statefiscalrankings and National Conference of State Legislatures, 2017 Legislative Partisan Composition as of November 8, 2017 http://www.ncsl.org/research/about-state-legislatures/partisan-composition.aspx#2017
Hmmm. Pretty obvious that, on average, Democratic legislatures are less disciplined in the fiscal department than their Republican counterparts. Does it matter? Is fiscal discipline overrated? Not according to Norcross and Gonzalez, who point out that "the high deficits and debt obligations [in the lowest ranking states] 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."
Perhaps the Republican states achieve fiscal solvency by refusing to adequately support core government services and programs, such as those that help low-income folk and protect the environment. Perhaps their books are in order but their priorities aren't. Something to explore in future posts.