The latest research conducted by George Mason University’s Mercatus Center reveals that predominantly Republican states are by far the most fiscally sound, while the most heavily weighted Democratic states demonstrate the least fiscal responsibility.
The Mercatus Center study divulged that the 10 states managing their budgets best are virtually all solidly Republican, with researchers saying that “Red is the new black.” A state’s “solid” Republican or Democratic status is determined by voters’ selection in the last four presidential elections — with a state being solid if its party won all four contests from 2000 to 2012. Florida voted twice for a Republican candidate and twice for a Democratic candidate during that period.
Top 10 most fiscally solvent states
- Alaska (solidly Republican)
- Nebraska (solidly Republican)
- Wyoming (solidly Republican)
- North Dakota (solidly Republican)
- South Dakota (solidly Republican)
- Florida (partially Republican, partially Democratic)
- Utah (solidly Republican)
- Oklahoma (solidly Republican)
- Tennessee (solidly Republican)
- Montana (solidly Republican)
10 least fiscally solvent states
- Connecticut (solidly Democratic)
- Massachusetts (solidly Democratic)
- New Jersey (solidly Democratic)
- Illinois (solidly Democratic)
- Kentucky (solidly Republican)
- Hawaii (solidly Democratic)
- California (solidly Democratic)
- Maine (solidly Democratic)
- New York (solidly Democratic)
- Maryland (solidly Democratic)
Examining the results
There was just one paradox in this year’s study on financial responsibility.
With solid red Kentucky moving into the bottom five this year — and being the one exception to Republican states proving themselves to be the most financially responsible — most of the fiscal irresponsibility was found in solidly blue states.
The study searched for several financial factors to distinguish the fiscal winners from the losers.
“[T]he reports focused on a state’s ability to pay its bills, manage long-term budget commitments, and whether they can adapt to sudden increase of spending in instances of emergency,” Townhall reports. “Cash solvency, for example, measures a state’s ability to pay its immediate bills, [while] budget solvency measures whether states will end the year with a surplus or deficit. Long-run solvency looks at a state’s ability to meet long-term spending commitments. Service-level solvency measures a state’s ability to respond to a demand for increased spending. And trust fund solvency measures unfunded pension liabilities and state debt.”
Even though some states registered with a high overall score, their handling of financial matters often fluctuate greatly in different areas.
“Alaska … ranks at the top for cash, budget and long-run solvency, but near the bottom on the other two measures,” Townhall’s Matt Vespa pointed out. “Ohio ranks fifth in cash solvency, but 48th on trust fund solvency.”
Mopping up the bottom
A newcomer to Mercatus’ research this year was Puerto Rico, which has been in the news recently about its request for a bailout over its mismanaged finances. Unsurprisingly, it finished at the very bottom on every measure in the study.
When it came to the five states that were worst at managing their finances, research showed that the major culprit was unfunded liabilities. For the most part, these financially irresponsible states remained static since last year, with New York being the exception by bouncing out of the bottom five.
“Kentucky, Illinois, New Jersey, Massachusetts, and Connecticut rank in the bottom five states, largely owing to the low amounts of cash they have on hand and their large debt obligations,” Mercatus reported.
Putting up slightly worse numbers than than last year, Connecticut and Massachusetts were unable to leave the bottom five. Researchers also noted that even though New Jersey and Illinois made slight improvements fiscally since last year, they were still unable to escape the five states at the bottom of the barrel.
Analyzing the bottom five states even further, it was found that massive debt obligations plagued every one.
“Each of the bottom five states exhibits serious signs of fiscal distress,” Vespa noted. “Though the states’ economies may be stronger than Puerto Rico’s — allowing them to better navigate fiscal crises — their liabilities still raise serious concerns.”
Another huge factor pushing blue states to the bottom of the list is unfunded liabilities.
“High deficits and debt obligations in the forms of unfunded pensions and healthcare benefits continue to drive each state into fiscal peril,” he continued. “Each holds tens, if not hundreds, of billions of dollars in unfunded liabilities — constituting a significant risk to taxpayers in both the short and the long term.”