The Mercatus Center released its full report on the fiscal condition of the states. Using data from states’ 2016 Comprehensive Annual Financial Reports, Mercatus was able to compare their ability to “meet its short-term and long-term obligations without incurring excessive debt, engaging in budget gimmicks, or using other evasive tactics.”
The study measures five areas: cash solvency, budget solvency, long-run solvency, service-level solvency, and trust fund solvency. Taking these five areas allowed Mercatus to assess thirteen indicators in each state. The winners are clear: Nebraska, South Dakota, Tennessee, Florida, and Oklahoma rank in the top five. At the bottom are Kentucky, Massachusetts, New Jersey, Connecticut, and Illinois.
In regards to budget solvency, Kentucky ranks 39th. The state’s cash solvency is 40th compared to other states. Our trust fund solvency and service-level solvency both come in at 43rd. Our long-run solvency is 46th.
With an overall ranking at 46th, the news on Kentucky is not good. What are some of the factors that have led to this point? Kentucky is high on the list of states with “large and growing pension liabilities.” We also get a mention as a state with consistently weak fiscal performance. The report summarizes the results on Kentucky by pointing out that current revenues cover a mere 98 percent of expenses, leading to an increasing deficit of $125 per capita. The long-term liabilities are $9,960 per capita.
It is not surprising that our pension system makes the state’s long-term prognosis rather grim. While the 2016 numbers are concerning, Kentucky has taken steps in the right direction. However, to jump in ranking will take significant amounts of work and cooperation.
Read the full report here: https://www.mercatus.org/system/files/norcross-fiscal-rankings-2018-mercatus-research-v1.pdf