When Will California Quit Holding Up Annual Fiscal Rankings?
There are several metrics that can be used to effectively rank the fiscal status of our nation’s 50 states. The top resource for years, when one searched for this information, was the Mercatus School at George Mason University. US News & World Report has and continues to provide an annual ranking of the states. The most thorough entrant into the mix is Truth in Accounting. But the new kid on the block is The Epoch Times.
The Mercatus School
at George Mason University used to rank the 50 states by fiscal condition but discontinued this helpful analysis with their 2018 report. Their studies measured states in meeting short-term and long-term financial obligations by reviewing their annual comprehensive financial reports (ACFRs). They found that, except for the size of their unfunded pension liabilities, most states appeared to be in stable condition. The five metrics, or dimensions, addressed cash, budget, long-run, service-level, and trust fund solvencies.
US News & World Report
ranks the 50 states, but fiscal stability is only one of eight criteria—such as crime, health care, and education—and is weighted at 11.36 percent, based on short-term and long-term fiscal stability considerations.
Truth in Accounting
, out of Chicago, Illinois, provides an excellent annual “Financial State of the States
.” They start with each states’ ACFRs and retirement plans’ reports and compare a state’s bills, excluding debt related to capital assets such as land, buildings, and infrastructure, to the available assets to pay these bills. Restricted assets and capital assets are excluded. The data is reported on a per-taxpayer level, called either a Taxpayer Burden or Taxpayer Surplus. A grading system is also provided to indicate a state’s ability to remain debt-free and to satisfactorily balance its annual budget.
My reports in The Epoch Times take each state’s unrestricted net position for governmental activities from the Statement of Net Position and divide it by the state’s population.
We provide rankings only after every state or municipality has released its ACFR, thus not being beholden to a specific self-imposed annual deadline date. With most states using a June 30th fiscal year end, ACFRs should be completed within six months. California being the major laggard, taking 22 months for its most recent published audit report, the most recent ranking
is for the year 2021. In this ranking, California was in 41st place.
Since Mercatus discontinued their reports in 2018, let’s look at the results for that year. Mercatus ranked California in 42nd place. For US News & World Report, California placed 43rd in its fiscal stability category. For 2018, Truth in Accounting
also ranked California 43rd.
The idea is to get the temperature of each state in a quick and expeditious manner. The good news is that this metric compares with the three other major studies utilizing multiple variables in their calculations.
Based on the above, this simple, quick, and easy methodology for ranking states provides the information a resident of that state needs to make a fiscal assessment once the ACFR is published. The big task is obtaining the 49 other reports. That’s where The Epoch Times provides value for its readers. And for those who miss the annual Mercatus studies.
This same math also applies satisfactorily to California’s counties, cities, school districts, community college districts, and county departments of education. These reports are also being provided by The Epoch Times.
To appreciate recent history, California was in 41st place for 2020
and in the same ranking
in 2019. The good news is that the Golden State has been moving up in the rankings, moving up from 42nd place in 2018. The bad news is that it is still in the bottom 20th percentile.
In this post-COVID era, it will be interesting to see if California made a major move in either direction. Unfortunately, if the past is prologue, we may not know until April of next year to see its 2022 ACFR and thus the 2022 state rankings.
Once a laggard, always a laggard? In the future, let’s hope the state that includes Silicon Valley within its borders can get its accounting software on par with the other states. Eighty percent of the states need to brag sooner and louder. And they don’t need to be lectured by California’s Governor on how to run their states.
John Moorlach is the director of the CPC’s Center for Public Accountability. He has served as a California State Senator and Orange County Supervisor and Treasurer-Tax Collector. This article originally appeared in The Epoch Times.