American Elephants


How Healthy Are Your State’s Finances? by The Elephant's Child

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The Mercatus Center at George Mason University has published a new study on the fiscal condition of the states. They rank each state on their fiscal health based on short-and long-term debt and other key fiscal obligations including unfunded pension liability and  healthcare  benefits. Growing pension obligations and increasing healthcare costs are straining budget planning.

Many states are facing big jumps in insurance premiums. Humana is seeking a 50% ObamaCare price hike in Michigan, deductibles are going up. Silver plan deductibles of $6,000 and $7,000 are not uncommon.

Ranking the 50 states is based 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 it’s 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?

The top five states, Alaska, Wyoming, North Dakota and South Dakota rank in the top five. Pensions and healthcare will be long term challenges, but these states are considered fiscally healthy. The top five have changed since last year. Wyoming moved up and edged Florida out, but Nebraska moved up to second place.

Kentucky, Illinois, New Jersey, Massachusetts and Connecticut are in the bottom five largely owing to low amounts of cash and big debt obligations. That little bright red spot at the bottom is Puerto Rico.


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