July 11, 2017

#10 | Ranking the States by Fiscal Condition: Montana

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On the basis of its fiscal solvency in five separate categories, Montana is ranked 10th among the US states for its fiscal health. On a short-run basis, Montana has between 4.85 and 6.31 times the cash needed to cover short-term obligations. Revenues exceed expenses by 8 percent, and net position improved by $425 per capita in FY 2015. On a long-run basis, net assets are 22 percent of total assets after debts have been paid. Long-term liabilities are 21 percent of total assets, or $2,336 per capita. Total primary government debt is low at $260 million, or $249 per capita. Montana’s weakest ranking is for trust fund solvency. Unfunded pension obligations, on a guaranteed-to-be-paid basis, are $18.46 billion, or 43 percent of state personal income. OPEB is 1 percent of state personal income.

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Key Terms

  • 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. (Montana ranks 7th.)
  • Budget solvency measures whether a state can cover its fiscal year spending using current revenues. Did it run a shortfall during the year? (Montana ranks 7th.)
  • Long-run solvency measures whether a state has a hedge against large long-term liabilities. Are enough assets available to cushion the state from potential shocks or long-term fiscal risks? (Montana ranks 13th.)
  • 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? (Montana ranks 31st.)
  • Trust fund solvency measures how much debt a state has. How large are unfunded pension liabilities, OPEB liabilities, and state debt compared to the state personal income? (Montana ranks 40th.)

For a complete explanation of the methodology used to calculate Montana's fiscal health rankings, download the full paper and the dataset at mercatus.org/statefiscalrankings

To read all our work on Montana, go to mercatus.org/states/montana.