ON-Lion Letter

In a July report from the Mercatus Center at George Mason University, senior research fellow Eileen Norcross ranks each U.S. state's financial health based on short- and long-term debt and other key fiscal obligations, including unfunded pensions and health-care benefits.  The study, which builds on previous Mercatus research about state fiscal conditions, provides information from the states' audited financial reports in an easily accessible format, presenting an accurate snapshot of each state's fiscal health.

With new spending commitments for Medicaid and growing long-term obligations for pensions and health care benefits, states must be ever vigilant to consider both the short- and long-term consequences of policy decisions.  Understanding how each state is performing in regard to a variety of fiscal indicators can help state policymakers as they make these decisions.

A closer analysis of the individual metrics behind the ranking shows how each state's fiscal condition should be assessed.  Notably, nearly all states have unfunded pension liabilities that are large relative to state personal income, indicating that all states need to take a closer look at their unfunded pensions, which represent a significant portion of each state's economy.  Another financial crisis could mean serious trouble for many states that are otherwise fiscally stable.

The Lynde and Harry Bradley Foundation in Milwaukee supports the Mercatus Center's research on state fiscal policy.

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