July 11, 2017

#40 | Ranking the States by Fiscal Condition: Vermont

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On the basis of its fiscal solvency in five separate categories, Vermont is ranked 40th in the US states for its fiscal health. On a short-run basis, Vermont has between 1.28 and 2.22 times the cash needed to cover short-term obligations. Revenues exceed expenses by 4 percent, and net position improved by $358 per capita in FY 2015. On a long-run basis, Vermont has a negative net asset ratio of 0.28, pointing to the use of debt financing and to pension and OPEB obligations. Long-term liabilities are 62 percent of total assets, or $4,282 per capita. Total primary government debt is $630 million, or 2.1 percent of state personal income. Vermont’s best ranking is for trust fund solvency. Unfunded pension obligations, on a guaranteed-to-be-paid basis, are $8.14 billion, or 27 percent of state personal income. OPEB is 7 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. (Vermont ranks 33rd.)
  • Budget solvency measures whether a state can cover its fiscal year spending using current revenues. Did it run a shortfall during the year? (Vermont ranks 21st.)
  • 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? (Vermont ranks 41st.)
  • 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? (Vermont ranks 48th.)
  • 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? (Vermont ranks 16th.)

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

To read all our work on Vermont, go to mercatus.org/states/vermont.