Connecticut ranks last among the states in fiscal health in a new study by the Mercatus Center at George Mason University.
The Mercatus Center, which describes itself as a research center that advances knowledge about how markets work to improve people’s lives, released the study last Wednesday, using data from the 2014 fiscal year.
Each state’s ranking was based on both short-term and long-term debt as well as other fiscal responsibilities, such as healthcare benefits and unfunded pensions.
While Connecticut did not shift significantly in the rankings since the previous year, it is still in a worse position comparatively, according to the study.
Other bottom-10 states included New York, California, New Jersey and Massachusetts, which have some of the largest economies in the U.S. and the most education-intensive industries, whereas some of the top five states, such as Alaska, Nebraska, and Wyoming have small, spread-out populations.
Each state’s ranking was based on an assessment of the state’s total assets, debt and long-term liabilities.
The study calculated overall fiscal solvency by considering five categories: cash solvency, budget solvency, long-run solvency, service-level solvency, and trust fund solvency.
The report states that Connecticut ranks at the bottom because of low amounts of cash and large debt obligations. Only the U.S. territory of Puerto Rico ranked below Connecticut.
Gov. Dannel P. Malloy’s spokesman, Chris McClure, said the governor understands the importance of addressing Connecticut’s unfunded long-term obligations.
“We’re working on a comprehensive plan, developed with input from nationally renowned experts, to tackle the issue of the unfunded pension liability,” he said. “It’s a plan that will provide stability for the state’s payments, predictability for businesses, and preserve benefits for those who earned them.”
Comptroller Kevin Lembo agreed with McClure, saying, “We need to continue to responsibly pay down our long-term obligations, whether it be pension, health care and other debt costs, in order to provide a state financial landscape that is predictable and stable.”
Lembo added the Mercatus report reestablishes what is already known: that Connecticut must make it a priority to reduce its debt and unfunded liabilities, tame revenue volatility and build up its cash reserves to protect against future economic downturns.
Connecticut ranks fourth in median household income by state, according to the United States’ Census Bureau, but the median household income of a state is does not necessarily predict its fiscal position.
Despite Connecticut’s last place ranking, the Mercatus Center’s rankings are subject to adjustments, some more drastic than others.
For example, the data used in this report is from 2014, which pre-dates a significant decline of oil prices. At the end of 2014, oil-producing states were showing large budget surpluses and vigorous fiscal health, but some of those states have encountered budget deficits in 2016 as a result of declining oil prices.
Despite some changes, the Mercatus Center said that its study illustrates that financial performance has remained relatively the same in most states, but signs of fiscal stress are still present.
A recent analysis by The Pew Charitable Trusts, using data through 2013, ranked Connecticut as the fifth-most indebted state, even when considering its high income.