Working paper by Sarah Arnett on ranking the 50 states on their fiscal condition.
Top 5 states by fiscal condition and their fiscal condition index:
1. Alaska 8.80
2. South Dakota 2.79
3. North Dakota 2.75
4. Nebraska 2.53
5. Wyoming 2.23
Bottom 5 states by fiscal condition and their fiscal condition index:
45. New York -1.78
46. California -2.01
47. Massachusetts -2.23
48. Illinois -2.42
49. Connecticut -2.48
50. New Jersey -2.81
Highlight from the discussion section.
The purpose of this paper is twofold: first, to further the use of cash, budget, long-run, and servicelevel solvency indices to measure fiscal condition, and second, to rank states on the relative strengths and weaknesses of their fiscal condition. In demonstrating the usefulness of the cash, budget, long-run, and service-level solvency indices, this paper also highlights that there is more than one way to measure state fiscal condition. The method advanced here has the advantage of relying on audited, publicly available data in addition to having an easily reproduced and transparent methodology that is open to all researchers. An important conclusion of this paper is that while rankings inherently have top performers and bottom performers, there is a substantial difference in state fiscal conditions. Some states, the top performers, are able to match revenues and expenses to achieve balanced budgets. These states also have enough liquid assets to pay their short-term bills on time as well as strategies to manage long-term liabilities. Other states, the bottom performers, have serious shortcomings in their management of at least one dimension of fiscal condition. For example, these states are unable to match revenues and spending levels, or they have used unsustainable strategies to manage long-term liabilities. Most states fall somewhere in the middle of the rankings, with neither overt weaknesses nor overt strengths.
Couple of thoughts. First, I wonder where the federal government’s fiscal condition would fall in the rankings. Second, I see potential for several case studies on why there is such a disparity between the top 5 and bottom 5.