October 9, 2018

#22 | Ranking the States by Fiscal Condition: Texas

Summary

On the basis of its solvency in five separate categories, Texas ranks 22nd among the US states for fiscal health. Texas has between 1.28 and 2.09 times the cash needed to cover short-term obligations. Revenues exceed expenses by 3 percent, with an improving net position of $155 per capita. In the long run, Texas has a net asset ratio of 0.26. Long-term liabilities are lower than the national average, at 33 percent of total assets, or $3,474 per capita. Total unfunded pension liabilities that are guaranteed to be paid are $431.40 billion, or 33 percent of state personal income. OPEB are $87.37 billion, or 7 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. (Texas ranks 34th.)
  • 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 24th.)
  • 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 21st.)
  • 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 13th.)
  • 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? (Texas ranks 15th.)

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.

To read all our work on Texas, go to mercatus.org/states/texas.