July 11, 2017

#16 | Ranking the States by Fiscal Condition: Indiana

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Summary

On the basis of its solvency in five separate categories, Indiana is ranked 16th among the US states for its fiscal health. On a short-run basis, Indiana has between 1.76 and 3.06 times the cash needed to cover short-term obligations. Revenues exceed expenses by 6 percent, and net position improved by $285 per capita in FY 2015. On a long-run basis, Indiana’s performance is better than average, with a net asset ratio of −0.11, but this measure of solvency is down significantly since the previous year. Long-term liabilities are 47 percent of state personal income, or $1,971 per capita, a large increase from last year. Indiana’s trust fund solvency is among the best in the country. On a guaranteed-to-be-paid basis, unfunded pension obligations are $53.67 billion, or 20 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. (Indiana ranks 25th.)
  • Budget solvency measures whether a state can cover its fiscal year spending using current revenues. Did it run a shortfall during the year? (Indiana ranks 14th.)
  • 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? (Indiana ranks 28th.)
  • 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? (Indiana ranks 19th.)
  • 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? (Indiana ranks 6th.)

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

To read all our work on Indiana, go to mercatus.org/states/indiana.