Arkansas

Contact us
To speak with a scholar or learn more on this topic, visit our contact page.

Summary

On the basis of its fiscal solvency in five separate categories, Arkansas ranks 28th among the US states and Puerto Rico for its fiscal health. Arkansas’s short-term position is strong. The state has between 2.65 and 3.47 times the cash needed to cover short-term liabilities. Revenues exceed expenses by 2 percent, producing a small surplus of $114 per capita. On a long-run basis, net assets represent 17 percent of total assets, and total liabilities are 28 percent of total assets. Total debt in Arkansas is $3.83 billion, and unfunded pensions are valued at $32.42 billion on a guaranteed-to-be-paid basis. Other postemployment benefits (OPEB) add $1.78 billion in total unfunded liabilities. 

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. (Arkansas ranks 15th.)
  • Budget solvency measures whether a state can cover its fiscal year spending using current revenues. Did it run a shortfall during the year? (Arkansas ranks 35th.)
  • 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? (Arkansas ranks 27th.)
  • 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? (Arkansas ranks 42nd.)
  • 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? (Arkansas ranks 28th.) 

For a complete explanation of the methodology used to calculate Arkansas's fiscal health rankings, download the full paper and the dataset at mercatus.org/statefiscalrankings-2016-edition.