The most financially stable states are largely Republican, he says fresh study from the Mercatus Center at George Mason University. While Kentucky didn’t fare as well in their analysis, the reports focused on the state’s ability to pay its bills, manage its long-term budget commitments and whether it can adjust to sudden increases in emergency spending. Republicans dominate most of the states that scored the best (via Investors Business Daily):
For example, cash solvency measures the state’s ability to pay current bills. Fiscal solvency measures whether the state will end the year with a surplus or deficit. Long-term solvency measures the state’s ability to meet long-term spending obligations. Service-level solvency measures the state’s ability to respond to increased spending demands. And trust fund solvency measures the state’s unfunded pension liabilities and debt.
States can do well on some measures and poorly on others. For example, Alaska ranks near the top in cash, budget and long-term solvency but near the bottom in the other two measures. Ohio ranks fifth in cash solvency but 48th in trust fund solvency. This year’s report includes Puerto Rico, which ranks last on every measure.
As for the bottom five states, the report said their unfunded liabilities remain a concern. Mercatus noted there was some movement in their scale from last year — New York is out of the bottom five — but overall, the remaining states haven’t budged enough to get them out of the bottom tier:
Kentucky, Illinois, New Jersey, Massachusetts and Connecticut were in the bottom five, largely because they have little cash on hand and immense debt obligations.
Every state has huge debt obligations. Each of the five weakest states shows earnest signs of fiscal problems. While their economies may be stronger than Puerto Rico’s, allowing them to better weather fiscal crises, their obligations still raise earnest concerns.
Unfunded liabilities remain a problem. High deficits and debt obligations in the form of unfunded pensions and health benefits continue to push every state into fiscal jeopardy. Each has tens, if not hundreds, of billions of dollars in unfunded liabilities—posing significant risks to taxpayers in both the compact and long term.
The bottom five states have changed since last year. Kentucky’s position dropped, 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, with slightly worse positions than last year.
