How much state debt is there per person, and, as Visual Capitalist's Jeff Desjardins asks, why is there such a wide discrepancy between states like Massachusetts ($11,000 per person) and Nebraska ($1,000 per person)?
THE SNOWBALL OF STATE DEBT
Today’s infographic from HowMuch.net, a cost information site, organizes states by debt per capita using a snowball-like effect.
Courtesy of: Visual Capitalist
The five states at the center of the snowball with the highest debt per capita are Massachusetts ($11,000), Connecticut ($9,200), Rhode Island ($8,900), Alaska ($8,200), and New Jersey ($7,400).
On the other end of the spectrum are the five states with the lowest state debt per capita: Tennessee ($900), Nebraska ($1,000), Nevada ($1,200), Georgia ($1,300), and Arkansas ($1,500).
While it is reasonable to expect big differences in debt per capita between countries, seeing an interstate difference of up to 10x per person seems a bit perplexing at face value. Let’s see if we can dig a little deeper on what accounts for these differences.
THE CURIOUS CASE OF MASSACHUSETTS
Currently, Massachusetts holds the title of the highest state debt per capita, as well as ranking #2 in terms of state debt as a percentage of GDP (14.0%). It’s also worth noting that debt analysts at S&P have recently lowered the outlook on state bonds from stable to negative.
Meanwhile, The Mercatus Center ranked Massachusetts in 49th place in their 2016 State Fiscal Rankings. (The only state to fare worse was Connecticut.)
Like other old and urban states, Massachusetts requires significant investments to repair aging roads, schools, and other infrastructure. For many fiscal analysts, however, it is the gap in unfunded liabilities that is the long-term concern.
Forbes notes that unfunded liabilities from public pensions are probably the biggest fiscal problem facing state governments today, and Massachusetts is no exception. Unfunded liabilities in the state are pegged at $94.45 billion with other postemployment benefits (OPEB) at $15.38 billion, and eventually these are issues that will have to be dealt with.
HEALTHIER BUDGETS
What does a healthier state budget look like? The best examples can be found in the Midwest.
Here’s Nebraska, which has about $1,000 of debt per person:
Nebraska exhibits strong fiscal health across all categories. On a cash basis, Nebraska has between 3.81 and 5.02 times the cash needed to cover short-term liabilities. Revenues exceed expenses by 7 percent, producing a surplus of $294 per capita.
– Mercatus Center at George Mason University