Report: California ranks No. 43 for government finance
“With California’s very late publication last month, all 50 states have now produced audited financial reports for their 2022 fiscal year,” writes Cato’s Marc Joffe.
The news for California is not good: despite the nation’s highest marginal income tax rate and punishing business taxes and fees, the Golden State ranks 43 in financial health.
Joffe tapped California Policy Center’s John Moorlach to measure the “Unrestricted Net Position (UNP)” of each state – a state’s total assets (like cash, receivables, and buildings) minus liabilities (like payables and debt) divided by population. A positive number (Alaska comes in at No. 1 with $24,199) is good; a negative number (California comes in at negative $5,668) is bad.
“In most cases, states that are in the red financially turn out to be blue politically,” Joffe concludes. “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 Republican governance is no guarantee of fiscal probity,” Joffe says. He points out that No. 37-ranked Texas has a UNP per capita of -$2,590 despite Republican political control of that state. The reason, Joffe says, is “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.”
Moorlach says the study’s findings are a red flag for California residents.
“The UNP is that it is a warning light to residents,” Moorlach says. “The higher the unrestricted net deficit per capita, the more susceptible the government is going to increase taxes. And if that imprudent strategy fails, the agency will be out of fuel and become a bankruptcy candidate.”
Californians can take some comfort in the fact that seven other states, all controlled by Democrat majorities, perform even worse:
44 Kentucky
45 Delaware
46 Hawaii
47 Massachusetts
48 Illinois
49 Connecticut
50 New Jersey