Budget deficits and pension liabilities contribute to state’s fiscal challenges
The report – Ranking the States by Fiscal Condition – considers short and long-term debt as well as other fiscal obligations, such as healthcare benefits and unfunded pensions. More specifically, rankings are based on fiscal solvency in five categories:
- Cash Solvency – measurement of a state’s cash and whether there is enough to cover short-term bills, including accounts payable, short-term debt, vouchers and warrants. Louisiana ranks 21st in the measure.
- Budget Solvency – measurement of a state’s ability to cover fiscal year spending with current revenues; whether or not the state ran a shortfall. The Pelican State ranks 47th in this measure.
- Long-Run Solvency – measurement of a state’s protection against large long-term liabilities; whether the state has enough assets available to cushion it from long-term fiscal risks or potential shocks. Louisiana ranks 36th in long-run solvency.
- Service-Level Solvency – measurement of taxes, revenues and spending in relation to state personal income; whether a state is in a position increase taxes without causing economic harm in the event its spending commitments require more revenue. Louisiana ranks 22nd in this measure.
- Trust Fund Solvency – measurement of a state’s debt and how it compares to state personal income; the burden of unfunded pension and OPEB liabilities. The Pelican State ranks 41st in this measure. The report notes that “total debt is $12.31 billion. Unfunded pension liabilities are $73.26 billion on a guaranteed-to-be-paid basis, and other postemployment benefits (OPEB) add $5.48 billion to unfunded liabilities. Together these three liabilities are equal to 46 percent of total state personal income.”
Alaska was ranked fiscally healthiest of all states, with Nebraska, Wyoming, North Dakota and South Dakota rounding out the top five.
On the other end of the spectrum, Puerto Rico was ranked dead last while Connecticut, Massachusetts, New Jersey, Illinois and Kentucky were rated the bottom five states.
While the Pelican State’s 2016 ranking is slightly better than it was in the 2015 version of the report – 35th healthiest – it still ranks behind many neighboring states:
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Florida, in particular, outshines Louisiana in budget solvency and trust fund solvency, where it ranks 7th and 12th. Louisiana ranks among the bottom 10 states in both of these categories.