What Do The Worst-Run States Have In Common?

Fiscal Sanity: Which political party is better at managing taxpayer dollars? The latest ranking of states’ fiscal condition offers an unequivocal answer.


For several years, the Mercatus Center at George Mason University has ranked states based on five measures of their financial condition: cash solvency, budget solvency, the ability to meet long-term spending commitments, state spending and taxes as a share of personal income, and unfunded pension liabilities and debt.

And lest anything think that Mercatus — a free-market-oriented group — is fudging the numbers, note that the data used to compile these rankings all come from official state annual financial reports and from state actuarial reports.

For 2016, the latest year for which data are available, the top five most fiscally sound states were, in order: Nebraska, South Dakota, Tennessee, Florida and Oklahoma.

The five worst states, starting at the bottom: Illinois, Connecticut, New Jersey, Massachusetts and Kentucky.

Notice anything similar in these groupings? We did. All but one of the top five are solidly Republican states. All but one of the bottom five are solidly Democratic.

Not An Aberration

This isn’t some one-year aberration, either.

For the first time this year, Mercatus produced rankings from 2006 through 2016.

What does that show?

Of the 10 states that show up most frequently at the bottom of the list since 2006, nine are solid blue states. Of the 10 states with consistently the best record, all but one are solidly red states. (See nearby table.)

There’s another commonality between the best-run and worst-run states. Taxes.

As it turns out, states in the worst fiscal shape also tend to impose the highest tax rates in the nation. In fact, six of the 10 states that consistently show up as the least fiscally solvent rank in the Top 10 for highest taxes as a share of income, according to the Tax Foundation.

Of the 10 most fiscally sound states, all but one impose below-average tax burdens on their residents.

Common Ingredients

So, if it’s not tax revenues, what makes a state fiscally sound or not? What the Mercatus data show is that it’s the result of years of overspending and overpromising, mostly to unionized government workers by pliant Democratic leaders.

Take a look at Illinois, which ranks dead last in the most recent report. According Mercatus, the Prairie State doesn’t have enough cash to cover short-term obligations. Its revenues only cover 92% of expenses. The state has long-term liabilities more than three times as large as its total assets. Illinois’ unfunded pension liability was almost $446 billion in 2016. That’s equal to 67% of the state’s total personal income.

Nebraska, which ranks at the top, has plenty of cash on hand, has little long-term liabilities, and lower-than-average taxes and spending as a share of income. Unlike Illinois, Nebraska has just $20 billion in unfunded pension liabilities.

Who Respects Taxpayers?

Indeed, every state at the bottom of the Mercatus ranking has enormous, and growing, pension liabilities. Unfunded pension liabilities more than doubled in New Jersey from 2006 to 2016. They tripled in Illinois and Kentucky.

Financially sound states, in contrast, have kept their pension liabilities low, tend not to spend more than they take in, and have plenty of cash on hand.

Or, to put it another way: The best-run states show greater respect for taxpayers than the worst-run states.

What does that say about Democratic and Republican priorities?


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Originally posted 2019-09-19 23:22:25.


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