July 11, 2017

#27 | Ranking the States by Fiscal Condition: Hawaii

Summary

On the basis of its fiscal solvency in five separate categories, Hawaii ranks 27th among the US states for fiscal health. Its new rank makes Hawaii one of the biggest movers since last year’s edition, primarily a result of improvements in the state’s cash position as well as moving from having a deficit to a surplus per capita. Hawaii’s short-run position is close to the US average. Hawaii holds between 2.64 and 3.72 times the cash on hand to meet short-term obligations. Revenues exceed expenses by 2 percent, and net position increased by $170 per capita in FY 2015. Hawaii performs below the US average on the long-run metrics. A negative net asset position of 0.19 and long-term liability ratio of 87 percent indicate that Hawaii has a relatively high level of long-term obligations at $11,779 per capita. Total primary government debt is $8.11 billion, or 11.9 percent of state personal income. On a guaranteed-to-be-paid basis, unfunded pension liabilities are $33.38 billion or 49 percent of state personal income, and OPEB is 13 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. (Hawaii ranks 16th.)
  • Budget solvency measures whether a state can cover its fiscal year spending using current revenues. Did it run a shortfall during the year? (Hawaii ranks 34th.)
  • 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? (Hawaii ranks 42nd.)
  • 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? (Hawaii ranks 44th.)
  • 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? (Hawaii ranks 42nd.)

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

To read all our work on Hawaii, go to mercatus.org/states/hawaii.