States in the Worst Fiscal Condition
States are just like any other entity when it comes to money management. States have income, liabilities, long and short term obligations, and so forth. We may be tempted to think that, at the state level, fiscal problems are either non-existent or very easily solved if they do occur. But this is simply not the case. States run into fiscal problems all the time. In fact, most states throughout our great country are currently struggling with their finances in one way or another. If we peruse the news, we can gather this quite easily. Many states have rather striking budget deficits or projected deficits. Some states have seen declines in tax revenues or have had to impose new taxes in order to correct fiscal imbalances. Whatever the specifics may be, it’s clear that maintaining fiscal health is a very general issue for most states throughout the nation.
In this post, we will point out and discuss a few states which are having the biggest difficulties when it comes to finances. These states can be said to be in the worst fiscal condition at the present moment. We will identify the reasons why these states are in such troubled financial straits. Hopefully, as local economies improve, the fiscal health of these states will rise in the near future. Whether local economies grow or stagnate, however, these states certainly need to make adjustments to their budget and cut out certain expenses. Proper fiscal management often involves making do with reduced revenues. Let’s take a close look at the states which have the worst fiscal situations.
This is a statistic which is likely to not cause too much shock. Our neighbor to the south, New Jersey, ranks near the bottom of fiscal health according to many authoritative sources. Several of New Jersey’s cities, such as Camden, are known to be quite rough, and so it’s placement in the list probably will not surprise many readers. Currently, the State of New Jersey doesn’t fare well across the most critical fiscal indicators, and in on some measures it performs dismally. We’ve actually discussed the New Jersey budget before on our blog. As we state in that article, the New Jersey budget leaves much to desire.
In terms of budget condition and long-term fiscal viability, New Jersey currently ranks near the very bottom among all states in our union. When it comes to short-term fiscal viability, New Jersey performs a bit better, but it still ranks in the bottom half among all states. Only on the ratio of state personal income to spending, revenues and tax rates does New Jersey rank in the top half of states. And on this index, it manages to make the top half but just a bit.
Even though it boasts many sites of considerable attraction, the State of Illinois ranks at the bottom of many lists of state fiscal health. Illinois is currently performing very poorly on most of the major indices of fiscal wellbeing. Illinois ranks near the bottom in terms of its ability to cover its short-term bills. This means that Illinois has a relatively low amount of cash available to cover these types of liabilities. Illinois also ranks poorly in terms of its budgetary condition, meaning that its spending to revenue ratio is less than stellar. The state is also lagging in terms of its long-term financial health. This means that Illinois is less prepared than other states to deal with potential financial setbacks and to cover long-term liabilities.
Illinois fares a bit better when it comes to its ratio of state personal income against spending, revenues and state tax rates. This ratio is important for understanding to what degree the state may be able to increase tax rates if necessary.
In terms of fiscal health, the current plight of the State of Kentucky is particularly saddening. Although Kentucky isn’t dead last on any index, the state is near the very bottom across almost all indices. This includes short-term fiscal wellbeing, long-term wellbeing, state trust fund wellbeing, budget condition and ratio of personal income to spending, revenues and tax rates. Simply put, Kentucky’s overall situation is quite awful. The state has a poorly managed and poorly funded pension system, low cash reserves and declining infrastructure. In fact, Kentucky’s fiscal viability has recently led to a downgrading in its creditworthiness by Standard & Poor’s. Just as corporations and individuals can have different levels of creditworthiness, so too can states.
We could devote many, many more blog articles to the budget and fiscal woes plaguing the states of our nation. On the whole, we need to get a grip on our finances and start leading much better fiscal lives. If this means we have to make substantial cuts to certain areas, then so be it. If we just need more revenue, then state tax increases might be the answer. State lawmakers and economists need to collaborate and get serious on finding workable solutions.
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