July 11, 2017

#37 | Ranking the States by Fiscal Condition: Connecticut

Summary

On the basis of its fiscal solvency in five separate categories, Connecticut ranks 37th for fiscal health among the US states—a significant jump from last year’s ranking of 50th. Connecticut’s fiscal health is greatly improved on a budgetary basis, but its metrics are still poor on a cash and long-run basis. The state has between 44 percent and 111 percent of the cash needed to cover short-term obligations. On a budgetary basis, Connecticut performs well, with revenues exceeding expenses by 11 percent and overall net position increasing by $784 per capita. Connecticut’s absolute net position remains negative. A net asset ratio of −1.69 indicates the state is heavily reliant on debt. Long-term liabilities are 221 percent of total assets, or $15,937 per capita. Of that amount, total primary government debt is $22.4 billion or $6,238 per capita. Unfunded pension obligations, on a guaranteed-to-be-paid basis, are $94.75 billion, or 39 percent of state personal income, and OPEB is 9 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. (Connecticut ranks 50th.)
  • Budget solvency measures whether a state can cover its fiscal year spending using current revenues. Did it run a shortfall during the year? (Connecticut ranks 3rd.)
  • 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? (Connecticut ranks 47th.)
  • 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? (Connecticut ranks 23rd.)
  • 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? (Connecticut ranks 36th.)

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

To read all our work on Connecticut, go to mercatus.org/states/connecticut.