Chris Christie's New Jersey Is Least Solvent State
By JOHN MERLINE, INVESTOR'S BUSINESS DAILY
Posted 08:02 AM ET
More bad news for Gov. Chris Christie: New Jersey is dead last in the nation in terms of its fiscal solvency, according to a new report.
The study, released this week by the free-market Mercatus Center at George Mason University, ranked each state's financial health based on a variety of measures, such as cash on hand to pay its current bills, budget surpluses or deficits, unfunded liabilities and ability to provide adequate public services.
The Mercatus study used 2012 data.
New Jersey came in last on two of those measures — budget and long-term solvency — and finished in the bottom 15 in two others.
The state's per-capita budget deficit, for example, was $727 in 2012, worst in the nation. On average, states were running a per-capita surplus of $364.
New Jersey also has one of the highest levels of per-capita long-term liabilities — $7,935 — nearly three times the national average. And its "net asset ratio" is -1.33, the worst in the nation.
To be sure, the state's poor showing can hardly be pinned on Christie. He'd been in office just two years before the data used in the study were collected.
As study's author, Sarah Arnett, points out, "the states at the bottom of this ranking are there as a result of years of poor financial management decisions, bad economic conditions, or a combination of the two."
For example, New Jersey's long-run solvency problems are "due in part to nearly 15 years of underfunding its state and local pensions," she noted.
As a result, the state has an unfunded pension liability of more than $25.6 billion, plus another $59.3 billion in unfunded public employee health benefit liabilities.
But Arnett also found that New Jersey's revenues aren't keeping up with expenditures, and that the state uses fiscal practices that "only appear to balance its annual budgets."
At the other end of the spectrum, Alaska finished first in the Mercatus ranking, with plenty of cash on hand, a per-capita budget surplus that is more than 14 times the national average, and a second place finish in long-term solvency.
The study also shows that Republican governors appear overall to do a better job running a sound fiscal ship than Democrats.
Of the top 10 most fiscally sound states, all but one — Montana — have a Republican governor. And Montana is generally a conservative state, having voted for the GOP candidate in each of the past five presidential elections.
Of the bottom 10, all but two — New Jersey and Pennsylvania — are run by Democratic governors and consistently vote Democratic.
These findings are consistent with other state economic rankings, which tend to find that so-called red states with lower taxes and fewer regulations tend to do better than blue states that have bigger governments, higher taxes and more red tape.
The Mercatus study used four different measures to determine a state's overall fiscal picture.
"Cash solvency" looks at how much cash a state can easily access to pay near-term bills.
"Budget solvency" is mainly a measure of a state's per-capita budget surpluses or deficits.
"Long-term solvency" looks at a state's ability to pay its long-term obligations, such as guaranteed pension benefits and infrastructure maintenance.
And "service solvency" examines whether a state has sufficient resources to provide their residents with an adequate level of services, such as public safety and education.