TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Thursday, July 13, 2017

Ranking The States By Fiscal Condition

Mercatus Map

Mercatus Center, Ranking the States by Fiscal Condition (2017):

This paper contains four sections. Section 1 reviews the definitions, data, and methodology used to produce the ranking. Section 2 presents an analysis of how states have changed both in absolute terms and over time, highlighting the biggest changes between fiscal years 2014 and 2015. Section 3 provides an analysis of the top five and bottom five states. Section 4 concludes with key takeaways from the best- and worst-performing states and implications for the years to come.

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Interesting to note, California and New York, in the top 4 states by population, and top 3 by GDP, recently started down the road of complete state-run health care. Estimates were than the cost would double the current state budgets.

How might that affect they're existing fiscal health, I wonder?

Posted by: MM | Jul 13, 2017 1:12:56 PM

Seriously? Mississippi ranks higher than New York, New Jersey, Connecticut and Massachusetts?

Are we ranking states by their illiteracy and poverty rates? By how young their populations are when they die?

Posted by: Um | Jul 13, 2017 9:26:10 PM

If you believe this chart, you probably also believe the ACA is collapsing. According to these rankings Alaska is rated as “above average.” Alaska currently is attempting to deal with a $2.9bb budget deficit, for a budget of $4.4bb. Going forward, Alaska relies on oil revenue for 90% of its state revenue stream, and has nearly exhausted its rainy day reserve. This is “above average” fiscal condition? Kansas is rated “average.” Nothing needs be said about that silliness. Wisconsin is reporting a growing $1.7bb deficit for 2017, which will be closed in part by tapping $450mm in reserve funds, which in turn are running out. Florida, ranked number 1 by Mercatus, has faced and continues to face a substantial structural budget deficit in the coming years. Florida has an aging population (really?) that is consuming and demanding more and more state resources. Meanwhile, California has a balanced budget and is paying INTO its rainy day funds, which this year will reach 66% of their constitutional target levels. Rated #43 by Mercatus–“below average.” Does any of this make sense? Perhaps the nature of the source of the chart may shed some light. Ah yes. The Mercatus Center was founded and is funded by the Koch Family Foundations. In addition to its Koch ties, it is also closely allied with the American Legislative Exchange Council (ALEC) and National Federation of Independent Business (NFIB). Not an argumentum ad hominum. Just saying.

Posted by: Publius Novus | Jul 14, 2017 6:30:34 AM

The answer is no, as any literate person can discern.

Posted by: Mike Petrik | Jul 14, 2017 9:03:16 AM

For someone who claims to be only interested in facts and the law, Mr. Publius certainly omits quite a few relevant facts and casts a lot of aspersions.

As a California native, and a more informed citizen generally, I'll provide what he left out:

- The federal government currently spends over $350 billion annually on California, twice the state budget, including when I last checked $60 billion in direct assistance specifically for the state budget.
- Though reduced from past years, the state of California is still issuing over $30 billion per year in new debt.
- The state's supplemental poverty measure, which includes government assistance but also factors in cost of living, stands at 24%, the highest in the nation, with Washington DC a close second.
- This past winter we had a 30-year record for rainfall, 200% of normal, but much of the state is still considered in drought conditions. This is because the state hasn't built any new water storage systems since 1978. Consequently, literally half of that rainfall had to be released into the ocean and is GONE.
- Over the past 10 years, which includes the worst of the recession and temporary cutbacks, state government spending still increased 90%. Over the same period, the state's GDP only increased 20%.
- Lastly, the state California has over $400 billion in unfunded liabilities, including $150 billion in current debt obligations.

Only if you look at the very short-term, as Mr. Publius has done, and throw out all the other evidence of fiscal dysfunction, does California "seem fine" when compared to other, smaller states.

Given the long-term budgetary and debt problems that exist, an $8 billion rainy day fund (4% of this year's budget) is laughable. That amount essentially equals what the state borrowered from the federal government a couple of years ago for unemployment insurance, and still hasn't paid back.

One-party states like California never admit that anything is wrong, and never plan ahead. That's what I've observed living here since the 1990s...

Posted by: MM | Jul 15, 2017 3:50:54 PM

The northeast and west coast have been supporting rural states financially for decades through taxes and transfer payments.

Poverty in the United States is heavily concentrated in the states Mercatus thinks are doing well, and would be a lot worse without the coastal states systematically bailing them out every year through taxes, transfer payments, and unnecessary military bases and bridges to nowhere.

Posted by: Federal subsidies | Jul 16, 2017 5:00:04 AM

These rural states have about 10 to 100 times as many senators per person as the larger states. It's not surprising that they use their political power to subsidize themselves at the expense of more populous states.

Posted by: Federal subsidies | Jul 16, 2017 5:02:57 AM

"The northeast and west coast have been supporting rural states financially for decades through taxes and transfer payments."

Deceptive and false. State governments have nothing do with with subsidizing other states. Taxpayers in the top 20% of households do that, via federal taxes they pay.

Posted by: MM | Jul 16, 2017 10:11:22 AM

Wohoo, South Carolina!

Clearly the federal government building infrastructure does nothing for state finances. Because state governments never borrow money to build infrastructure on their own, and infrastructure never does anything to help the economy.

Posted by: Earmarks | Jul 16, 2017 7:48:11 PM

Thank you MM for pointing that out! BTW where do these top 20% I can go and thank them? Do I go to these rural states or somewhere else?

Posted by: Eddy from Accounting | Jul 17, 2017 7:13:47 AM

"BTW where do these top 20% I can go and thank them?"

Everywhere in America, but they're concentrated in CA, NY, FL, and around DC.

Other than Florida, those all score below average in state fiscal condition.

If you'd like to make a causal argument, then by all means, please provide some evidence!

Posted by: MM | Jul 17, 2017 7:30:22 AM