The top-performing states tend to exhibit fiscal discipline, an area in which Kansas gets low marks, according to Mercatus. The George Mason University-based research center annually ranks the fiscal health of the 50 states each year.
Mercatus researchers base the state financial health rankings on five categories: whether a state has enough cash on hand to cover short term bills; whether a state can cover its fiscal year spending with current revenues; whether the state can meet long-term spending commitments; whether the state has the ability to increase spending if necessary; and the size of the state’s unfunded pension and health care liabilities.
Kansas ranks 32nd overall. That’s down a notch from 2016, when the state ranked 31st.
Top performing states have a few things in common, according to researchers. They keep debt levels low relative to resident income, have revenues that outpace expenses, and have lower debt levels.
“These factors can easily be threatened if a state relies too heavily on narrow tax bases and volatile revenue sources or if pension plans are not adequately funded, leading to persistently large and growing liabilities,” according to a Mercatus press release.
Florida topped the list followed by North Dakota, South Dakota, Utah and Wyoming.
Florida’s low debt and strong cash position helped propel it to the top spot. Researchers noted that oil and gas revenues played a large role in a state’s short-term fiscal health. For example, Alaska once sat at the top of the ratings, but with oil prices declining, the state fell out of the top five. Long term pension liabilities and health care are the biggest challenges for the healthiest states, according to Mercatus researchers.
New Jersey ranked last with Illinois, Massachusetts, Kentucky, and Maryland rounding out the bottom five.
“Each of the bottom five states exhibits serious signs of fiscal distress,” according to the Mercatus release.
Their low fiscal health ranks were related to low amounts of cash on hand and large debt obligations. They’re also ham-strung by high deficits and debt obligations due to unfunded pensions.