States Face Shaky Financial Futures; Pensions at Risk

You Can Read the Full Mercatus Center Study HERE

States are mounting an uneven fiscal recovery from the Great Recession, with energy-rich states leading and Northeastern states with big pension obligations lagging, a new study shows.

Alaska, the Dakotas, Nebraska and Florida are on the most solid financial footing, according to rankings of the 50 states released Tuesday by the Mercatus Center at George Mason University. New York, Connecticut, Massachusetts, New Jersey and Illinois are at the bottom. 

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The Mercatus Center, a public policy research group, ranked the 50 states based on how well each state government planned spending in fiscal 2013 — the most recent year for which data was available — as well as their future financial prospects. from annual budgeting to cash to pay bills, to funding for pensions and long-term plans.

Of the top five states, the Dakotas, Nebraska and Alaska raked in revenue from national resources like oil.

And while most state governments now have enough cash to pay short-term bills, according to Norcross, the study Ranking the States by Fiscal Conditionsuggests that the future is less certain. One common burden is the commitment to pay out huge sums in pensions.

The report shows how a single year's budget might not reflect the true fiscal health of a state. Some states may struggle financially because they used pensions and entitlements to pay general expenses. 

This 2011 photo shows protests against pension reform 
in Illinois. The state ranks dead last when it comes to 
fiscal solvency, says a new report, due in part to 
unfunded pension obligations.(Photo: Seth Perlman, AP)

In Illinois, ranked No. 50, the government used funds set aside for future pensions to pay more urgent bills. When the pensions came due, Illinois tried to cut them.

A judge ruled this past May that Illinois' pension cuts were unconstitutional. But that left the state with no plan to deal with a growing list of debts.

Over two decades, New Jersey, ranked 49th, did not make consistent annual payments to the pension system, funding it with debt instead. It subsequently owed $5 billion in pensions.

Read the rest of the story HERE.

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