Wyoming listed as one of top 5 fiscally healthiest states in U.S.
by Pinedale Online!
January 18, 2014
The Mercatus Center at George Mason University released a study in January (2014) on the fiscal condition of the 50 U.S. states. Author Sarah Arnett created cash, budget, long-run, and service-level solvency indices using fiscal year 2012 data to measure the dimensions of fiscal condition. Alaska was ranked #1. Wyoming came in as 5th in the top healthiest state economies.
The top five states with the highest-ranked overall fiscal condition were:
2. South Dakota
3. North Dakota
The five states with the lowest-ranked fiscal condition were:
1. New Jersey
The report is based off a variety of fiscal data from Comprehensive Annual Financial Reports (CAFRs) produced by local and state governments.
States that are doing well have sound fiscal practices, balanced budgets and strategies to manage their long-term liabilities. Well-off states are benefitting from increased revenues due to natural resource extraction of natural gas, oil and coal and benefiting from the current higher oil prices. Some states, such as Alaska, which reap the benefits of tax royalty revenue from oil and natural gas extraction, are routinely keeping a large cash balance on hand to accommodate cash-flow volatility in their operating budgets. Alaska has neither a state personal income tax nor a sales tax. Nebraska is constitutionally prohibited from incurring debt which means it has no significant bond debt, giving it a much lower long-term liability ratio than most other states. North Dakota and Wyoming government entities (state and local) have gleaned huge tax royalties from the development of oil shale resources in their states and high oil prices. Top performing state governments are able to balance what they spend with what they receive in as tax revenue to achieve balanced budgets. States that are doing well have enough liquid assets to pay their short-term bills on time as well as strategies to manage long-term liabilities. States doing well in fiscal year 2012 saw increases in net assets, did not spend more than they received in revenue, had cash on hand and in rainy day funds, and had low long-term liabilities per capita.
States that are doing poorly weak performance related to cash, budget, and long-run solvency indicators. They are dealing with outstanding debt, cash and budget shortfalls, claims payable for worker’s compensation, Medicaid claims, and other employee-related items, and long-term liabilities including pension obligations. Lower ranking states have government administrations which have used unsustainable strategies to manage long-term financial liabilities. New Jersey and Illinois spend far more than they receive in tax revenues and for decades have not had money to pay for their pension system agreements, resulting in underfunding strategies incurring billions of dollars in unfunded liabilities for the health benefits of retired teachers, police, firefighters, and other government workers. To cover the costs of its pension obligations, government in lower performing states like Illinois have sold bonds to cover its obligations knowingly incurring long-term debt to meet its current year pension obligations. States with the weakest fiscal conditions in fiscal year 2012 saw decreases in net assets, spent more than the received in revenue, had relatively low levels of cash on hand and higher-than-average long-term liabilities per capita. "Although the ranking represents a snapshot in time, the states at the bottom are there due to years of poor financial management decisions, bad economic conditions, or a combination of both," the report stated.
Click on this link to read the report: State Fiscal Condition – Ranking the 50 States Working Paper by Sarah Arnett, January 2014