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Three Midwestern states rank near the top in study of fiscal solvency

by Tim Anderson ~ July/August 2015 ~ Stateline Midwest »
In a new national analysis of the fiscal health of each of the 50 U.S. states, Nebraska, North Dakota and South Dakota ranked among the top five. The study was released in July by the Mercatus Center at George Mason University. It ranked states in part on their levels of short- and long-term debt as well as unfunded pensions and health care benefits.
Medicaid is another source of fiscal worries. Between now and 2020, estimates show that spending in this public health insurance program will increase annually by 7 percent — a rate much higher than average yearly tax growth for states.
In the study’s measure of overall fiscal solvency, North Dakota ranked second, thanks largely to dramatic economic growth in its energy sector. A dependence on oil revenue, though, remains a long-term risk to its budget solvency, notes Eileen Norcross, a senior research fellow at Mercatus and the study’s author.
In South Dakota, where there is a constitutional ban on general-obligation bonds of more than $100,000, per capita debt is low. In addition, the state’s retirement system for public employees was funded at 100 percent in fiscal year 2014 (based on the ratio of actuarial asset value to actuarial accrued liability).
In fiscal year 2013, Nebraska had the lowest long-term liability per capita, $254, among all U.S. states. Ohio also placed in the study’s list of top-10 states, ranking seventh for overall fiscal solvency. On the flip side, Illinois’ high level of unfunded long-term liabilities placed it at the bottom of states.
“There are troubling signs that many states are still ignoring the risks on their books, mainly in underfunded pensions and health care benefits,” the study concludes.