All 50 states have published their audited financial reports for their 2022 fiscal years, and according to a Cato Institute review of the data, some states are in worse financial shape than others.
While that should come as no surprise given the wide array of circumstances and governance one will find across the country.
But what is interesting is how many so-called “blue states” are underwater:
In most cases, states that are in the red financially turn out to be blue politically: the six states with the most negative unrestricted net positions have Democratic legislatures. Deep blue New York and California are also in the red financially.
But before fans of Team Red get too excited…having Republicans in charge is no guarantee of fiscal health:
Texas has a UNP per capita of -$2,590 despite the lack of Democrats controlling policy at the state level. This deficit is fully accounted for by Texas's large liabilities for underfunded public employee retirement benefits, including pensions and retiree healthcare. Other states that are both red financially and politically include Missouri and South Carolina. By contrast, Florida is above water, albeit slightly.
Ah, those unfunded state pension liabilities. They are a problem that most state pols prefer not to discuss. But the Council of State Governments did it for them:
These obligations are not always fully funded…resulting in a projected cumulative $1.3 trillion funding gap for states following negative fiscal year 2022 returns. The stability and participation rates of defined-benefit pension plans vary over time, making investment returns and available assets a cause for concern.
That's putting it diplomatically. Those obligations aren't going to go away, making state balance sheets somewhat suspect over the long term.
But a handful of states have been fortunate enough to set money aside to handle most emergencies, and political promises:
The financially strongest states, Alaska, North Dakota, and Wyoming benefit from having “permanent funds” based on natural resource endowments in each of these states.
This is another way of saying that oil, gas, coal, and assorted minerals have made them fiscally sound. This ought to last until another group of politicians decides it's time to shut down the natural resources bonanza that's made these states' finances relatively healthy.
The opinions expressed in this article are those of the author and do not necessarily reflect the positions of American Liberty News.
