October 9, 2018

#11 | Ranking the States by Fiscal Condition: Alaska

Summary

On the basis of its solvency in five separate categories, Alaska ranks 11th among the US states for fiscal health. Alaska has between 17.07 and 17.92 times the cash needed to cover short-term obligations. However, much of this revenue is part of the Alaska Permanent Fund and is not readily available for spending. With the fall of oil prices between FY2014 and FY2016, Alaska’s budgetary position has weakened significantly. Revenues only cover 52 percent of expenses, with a worsening net position of –$6,946 per capita. In the long run, Alaska has a net asset ratio of 0.77. Long-term liabilities are higher than the national average in per capita terms at $8,670 per capita, but lower than the national average when measured as a percentage of total assets. Total unfunded pension liabilities that are guaranteed to be paid are $37.33 billion, or 91 percent of state personal income. OPEB are $8.48 billion, or 21 percent of state personal income.Share this

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. (Alaska ranks 1st.)
  • Budget solvency measures whether a state can cover its fiscal year spending using current revenues. Did it run a shortfall during the year? (Alaska ranks 50th.)
  • 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? (Alaska ranks 6th.)
  • 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? (Alaska ranks 2nd.)
  • 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? (Alaska ranks 50th.)

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

To read all our work on Alaska, go to mercatus.org/states/alaska.