Alaska

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How Does Alaska Compare to Other States?

Alaska ranks 1st among US states for its fiscal health, based on its fiscal solvency in five separate categories.

Alaska’s position in FY 2013 was largely driven by a high level of cash and revenues. A cash ratio of 13.32 indicates the state had 13 times the cash needed to cover short-term bills, more than six times the national average. An operating ratio of 1.56 indicates revenues exceeded expenses by 56 percent in FY 2013 and the state showed a surplus of $8,043. On a long-run basis, Alaska’s liabilities were a small portion of assets. However, a strong reliance on oil revenues also reveals some potential instability. Revenues were 44 percent of state personal income and expenses were 28 percent of state personal income. Volatility in oil prices could result in a drop in revenue and put pressure on current spending, which in FY 2013 was very large relative to the state personal income. In 2005 Alaska closed its defined benefit pension plans, but a deep funding gap remained in the closed plan. On a guaranteed-to-be-paid basis, unfunded pension liabilities amounted to almost $25 billion, which was 67 percent of total state personal income. This indicates the unfunded pension liability is potentially an area of fiscal pressure, given the state’s reliance on oil revenues.

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

1. Alaska ranks 1st 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. Alaska’s very high levels of cash relative to short-term spending were driven by the state’s heavy reliance on oil revenues. In FY 2013, Alaska’s cash ratios indicate the state had 13 times the cash needed to cover short-term spending, far higher than the national average. This made Alaska an outlier for cash solvency and also points to the volatile nature of the state’s tax system, which is subject to changes in oil prices.

 

Cash ratio

      Quick ratio

     Current ratio

Alaska

13.32

13.59

13.69

National average

2.23

3.02

3.37

2. Alaska ranks 1st 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? Alaska’s budgetary position was very strong. The state’s revenues exceeded expenditures by 56 percent with a surplus of $8,043, the highest in the nation.

 

Operating ratio

Surplus (deficit) per capita

Alaska

1.56

$8,043

National average

1.07

$473

3. Alaska ranks 2nd 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? On a long-run basis, Alaska had excess assets after debts had been met. Net assets were 82 percent of total assets. (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.) Long-term liabilities were only 4 percent of total assets and amounted to $4,102 per capita.

 

Net asset ratio

Long-term liability ratio

Long-term liability per capita

Alaska

0.82

0.04

$4,102

National average

0.03

0.40

$2,768

4. Alaska ranks 50th 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? In Alaska, revenues represented 44 percent of state personal income, and expenses were 28 percent of state personal income. This suggests that revenues and spending were far higher than residents’ total income and may be unsustainable.

 

Tax to income ratio

Revenues to income ratio

Expenses to income ratio

Alaska

0.13

0.44

0.28

National average

0.06

0.14

0.13

5. Alaska ranks 50th 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? On a guaranteed-to-be-paid basis, Alaska’s unfunded pension liabilities in the closed defined benefit plans represented 67 percent of state income, putting Alaska at the bottom of trust fund solvency. The plan is closed, which lessens the long-term fiscal risk for the state but also highlights an area of fiscal stress for the near and medium term. Unfunded OPEB liabilities were also significant, representing 21 percent of state personal income. Total debt was 8 percent of personal income, about twice the national average.

 

Pension to income ratio

OPEB to income ratio

Debt to income ratio

Alaska

0.67

0.21

0.08

National average

0.29

0.04

0.04

State debt 

State debt is calculated from each state’s Comprehensive Annual Financial Report. Alaska’s total primary government debt was $3 billion, less than the national average but high relative to the state personal income.

General obligation bonds

Total primary government debt

State personal income

Ratio of debt to state personal income

Total primary debt per capita

Alaska

$0.89 billion

$3.00 billion

$36.87 billion

8.1%

$4,103

National average

$6.08 billion

$12.60 billion

$282.05 billion

4.0%

$1,824

Pension liability

Pension liability is calculated from each state’s pension actuarial reports. Alaska’s unfunded pension liability was almost $25 billion on a guaranteed-to-be-paid basis. The system is closed, which lessens the long-term fiscal risk for the state but represents a significant obligation for Alaska in the near term.

Unfunded pension liability

Funded ratio

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

Market value of funded liability ratio

Alaska

$8.17 billion

55%

$24.88 billion

40%

National average

$19.85 billion

70%

$78.79 billion

40%

OPEB liability 

OPEB liability is calculated from each state’s Comprehensive Annual Financial Report. Alaska’s unfunded OPEB liability was $7.88 billion and funded at 54 percent, putting it far above the national average for funded status.

 

Total unfunded OPEB liability

Funded ratio

Alaska

$7.88 billion

54%

National average

$10.84 billion

11%