The Mercatus Center Ranked All 50 States On Fiscal Solvency

The Mercatus Center is out with their 2017 rankings of the fifty states’ fiscal condition, ranking them based on their fiscal solvency in five key areas:

  • 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?

New Jersey was ranked dead last, worse than even California and Illinois. while Florida came in first. Below is tabled every state’s ranking:

Top-performing states tend to exhibit fiscal discipline in the form of having high levels of cash, maintaining revenues that exceed expenses, and keeping debt levels low relative to resident income. These factors can easily be threatened if a state relies too heavily on narrow tax bases and volatile revenue sources or if pension plans are not adequately funded, leading to persistently large and growing liabilities.

You may have noticed on the list that the states with a better fiscal condition tend to be conservative states – and you’d be right. After all, it’s not until we get to Washington, ranked 26th, that we see a liberal state, meaning that every liberal state ranks below average in this survey.

The blog Unbiased America ran a regression comparing each state’s fiscal condition with its ideological leaning (based off a Gallup survey of the self-identified ideological leanings of each State), and the results were clear: The more conservative a state is, the better its fiscal condition.

And when we look at how people vote with their feet, it’s clear what they prefer. On net basis, 1000 people move from blue states to red states every day. As it turns out, when your entire platform consists of wasteful spending and high taxes, causing further problems that will be solved with more wasteful spending funded by even more taxes, people eventually begin to get fed up with it. That’s also reflected in the over 1,000 lost seats Democrats have suffered under Obama’s presidency at the federal and state level, and the fact that they’ve lost every special election thus far during the Trump presidency.

Where would you rather live? A liberal of a conservative state?

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By Matt
Matt is the co-founder of Unbiased America and a freelance writer specializing in economics and politics. He’s been published ... More about Matt
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