Arizona ranks 32nd among US states for its fiscal health, based on its fiscal solvency in five separate categories.

How Does Arizona Compare to Other States?

Arizona ranks 32nd among US states for its fiscal health, based on its fiscal solvency in five separate categories.

For FY 2013, Arizona exhibited a mixed performance. The state had a relatively weak cash position with less liquid cash on hand relative to short-term expenses according to the strictest measure of cash solvency. When including less liquid forms of cash, the state could cover its short-term expenses, but it performed worse than the national average in terms of cash solvency. Arizona did better on a fiscal year basis. For FY 2013, Arizona was able to meet fiscal year commitments while showing a surplus of $351 per capita. The long-run picture indicates that Arizona had a small fiscal cushion and excess assets on hand after paying its debts. Total taxes represented 5 percent of state income, indicating that the state was about average with the nation on this measure. The total unfunded pension obligation for Arizona’s four major pension plans was $62 billion, or 25 percent of state personal income, when measured on a guaranteed-to-be-paid basis. Arizona does not issue general obligation debt, and it had a low level of other postemployment benefits (OPEB) relative to the state economy and a higher-than-average OPEB funding ratio of 33 percent when compared with other states that were largely unfunded.

See “Ranking the States by Fiscal Condition” for a complete explanation of the methodology used to calculate Arizona’s fiscal health rankings.

1. Arizona ranks 44th in terms of cash solvency.

Cash solvency measures whether a state has enough cash to cover its short-term bills, which include accounts payable, vouchers, warrants, and short-term debt. The cash ratio includes only the most liquid forms of cash. Arizona had available 94 percent of the liquid cash needed to cover short-term liabilities, putting it significantly below the national average of 2.23 times the liquid cash to liabilities. When including less liquid forms of cash, such as receivables, Arizona was in a better position, but it still underperformed compared to the national average.


Cash ratio

        Quick ratio

      Current ratio





National average




2. Arizona ranks 10th in terms of budget solvency.

Budget solvency measures whether a state can cover its fiscal year spending out of current revenues. Did it run a shortfall during the year? The operating ratio measures revenues relative to expenses. Arizona was slightly above the national average with revenues sufficient to meet yearly expenses, and a budget surplus of $351 per capita.


Operating ratio

Surplus (deficit) per capita




National average



3. Arizona ranks 21st in terms of long-run solvency.

Long-run solvency measures whether a state has a hedge against large long-term liabilities. Are there enough assets available to cushion the state from potential shocks or long-term fiscal risks? The net asset ratio is the percent of assets remaining after the state has paid its debts. (The net asset ratio measures the total of restricted and unrestricted assets, or net assets, as a portion of total assets. Net assets are a subset of total assets, which also include capital and government buildings.) Arizona did better than the national average with net assets representing 13 percent of total assets. Long-term liabilities represented 27 percent of total assets, which was lower than the national average of 40 percent, putting Arizona in a more favorable fiscal position. Long-term liabilities were $1,665 per capita.


Net asset ratio

Long-term liability ratio

Long-term liability per capita





National average




4. Arizona ranks 22nd in terms of service-level solvency.

Service-level solvency measures how high taxes, revenues, and spending are when compared to state personal income. Do states have enough “fiscal slack”? If spending commitments demand more revenues, are states in a good position to increase taxes without harming the economy? Is spending high or low relative to the tax base? Total taxes represented 5 percent of Arizona’s state personal income (a measure of the economy). Total revenues were 13 percent of state personal income, slightly below the national average; government expenses represented 12 percent of state personal income. These ratios are one measure for the size of government spending relative to the economy.


Tax to income ratio

Revenues to income ratio

Expenses to income ratio





National average




5. Arizona ranks 25th in terms of trust fund solvency.

Trust fund solvency measures how much debt a state has. How large are unfunded pension liabilities, other postemployment benefits (OPEB) liabilities, and state debt compared to the state personal income? Arizona’s unfunded pension obligations on a guaranteed-to-be-paid basis represented a quarter of state personal income, placing a significant claim on the state economy. (Pension benefits are recalculated based on a discount rate of 3.38 percent to account for the government’s guarantee to pay employees earned benefits.) Unfunded pension obligations far outstripped the amount of debt relative to the state economy, which was calculated at 4 percent, putting Arizona at the national average.


Pension to income ratio

OPEB to income ratio

Debt to income ratio





National average




State debt

State debt is calculated from each state’s Comprehensive Annual Financial Report. Arizona did not issue general obligation bonds. The state had a total debt of $10 billion or 4.2 percent of state personal income, close to the national average.

General obligation bonds

Total primary government debt

State personal income

Ratio of debt to state personal income

Total primary debt per capita



$10.36 billion

$245.00 billion



National average

$6.08 billion

$12.60 billion

$282.05 billion



Pension liability

Pension liability is calculated from each state’s pension actuarial reports. Arizona’s unfunded pension liability for its four major plans was reported at $14 billion, or 71 percent funded. However, when valued based on the government’s guarantee of payment, these four plans had a total unfunded pension obligation of $62 billion.

Unfunded pension liability

Funded ratio

Market value of unfunded liability (risk-adjusted discount rate)

Market value of funded liability ratio


$14.81 billion


$62.33 billion


National average

$19.85 billion


$78.79 billion


OPEB liability

OPEB liability is calculated from each state’s Comprehensive Annual Financial Report. Arizona’s OPEB liability for public sector employees was $453 million, with a funding ratio of 33 percent, putting it above the national average for OPEB funding.


Total unfunded OPEB liability

Funded ratio


$453 million


National average

$10.84 billion