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On the basis of its fiscal solvency in five separate categories, Texas ranks 16th among the US states and Puerto Rico for its fiscal health. On a cash basis, Texas has between 1.29 and 2.15 times the cash needed to cover short-term liabilities. Revenues exceed expenses by 13 percent, for a surplus of $635 per capita. Net assets are 37 percent of total assets, and total liabilities are 21 percent of total assets. Total debt is $44.37 billion. Unfunded pension liabilities are $229.72 billion, and other postemployment benefits (OPEB) are $66.95 billion. These three liabilities are equal to 28 percent of total state personal income.

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. (Texas 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? (Texas ranks 4th.)
  • 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? (Texas ranks 18th.)
  • 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? (Texas ranks 9th.)
  • 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? (Texas ranks 11th.)

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