(Related: 12 States With the Best Fiscal Health)
The study ranked states according to 1) Cash solvency, or ability to cover short-term bills; 2) Budget solvency, or ability to cover a fiscal year’s worth of spending with revenues without a shortfall; 3) Long-run solvency, or ability to meet long-term spending needs and weather economic shocks; 4) Service-level solvency, or “fiscal slack” to increase spending if citizens demand more services; and 5) Trust fund solvency, or the status of unfunded pension and health care liabilities, as well as other debt.
State Budget Gaps
State budgets overall are still below prerecession levels, long-term liabilities have, on average, increased over time, and underfunded pension liabilities remain an ongoing problem.
However, for those at the bottom, there’s good news: The study concludes the fiscal problems of all states are not “insurmountable.”
The Mercatus Center is a free-market oriented think tank, whose board includes Charles Koch, former executive VP of Koch Industries Richard Fink, president of the Charles Koch Foundation Brian Hooks, and Edwin Meese, who served as attorney general in the Reagan administration.
Check out the gallery above for the 12 states in the worst fiscal shape, according to the Mercatus Center.
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