July 11, 2017

#33 | Ranking the States by Fiscal Condition: Arizona

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On the basis of its solvency in five separate categories, Arizona ranks 33rd among the US states for fiscal health. On a short-run basis, Arizona has between 96 percent and 142 percent of the cash needed to cover short-term obligations; this is much lower than the US average of between 268 and 393 percent. Revenues exceed expenses by 5 percent, and Arizona’s net position increased by $245 per capita in FY 2015. After meeting its debts, net assets are 6 percent of total assets. Long-term liabilities are 36 percent of total assets, well below the US average. On a guaranteed-to-be-paid basis, unfunded pension liabilities are $85.59 billion, or 32 percent of state 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. (Arizona ranks 44th.)
  • Budget solvency measures whether a state can cover its fiscal year spending using current revenues. Did it run a shortfall during the year? (Arizona ranks 18th.)
  • 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? (Arizona ranks 20th.)
  • 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? (Arizona ranks 26th.)
  • Trust fund solvency measures how much debt a state has. How large are unfunded pension liabilities and OPEB liabilities compared to the state personal income? (Arizona ranks 18th.)

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

To read all our work on Arizona, go to mercatus.org/states/arizona.