It’s a good time to be in the Sunshine State, according to a study released today by George Mason University’s Mercatus Center.
Florida’s No. 1 ranking ends Alaska’s three-year reign atop the leaderboard.
For the ranking, each state was evaluated on the amount of cash it had on hand as well as its budget solvency, long-run solvency, service-level solvency and trust-fund solvency.
Florida ranked No. 1 in fiscal solvency because of the high levels of cash it kept in reserve — between eight and 10 times the cash needed to cover the state’s short-term obligations. Florida also benefited from revenue that exceed expenses by 7 percent and from having a low liability-to-asset ratio compared to other states.
Florida’s liabilities were 34 percent of total assets, much lower than the state average of 61 percent, the study said. Additionally, the study noted that Florida has relatively low unfunded pension obligations – 22 percent of state personal income – and a total debt of $24.5 billion, which represents just 3 percent of state personal income.
After Florida in the ranking came North Dakota, South Dakota, Utah and Wyoming, respectively. The study found that top-performing states tended to have higher levels of cash, more robustly funded pensions and strong operating positions.
New Jersey earned the dubious honor of being listed as the state with the worst fiscal condition. The study said New Jersey’s revenue only covered 91 percent of its 2015 expenses. The Garden State also suffers from negative net assets and huge liabilities associated with pension obligation bonds, school construction bonds and the securitization of the tobacco master settlement agreement.
Rounding out the bottom five were Illinois, Massachusetts, Kentucky and Maryland.
According to the study, many states, including Alaska, dropped in the ranking because of the prolonged period of low oil prices. That has caused tax revenue in oil-reliant states to fall off, the study said.
Poor-performing states also tended to have growing pension liabilities, other post-employment benefits and additional long-term obligations, the study said.
Jeff Jeffrey is the digital producer for ACBJ’s national news desk.
Original content South Florida Business Journal