July 11, 2017

#28 | Ranking the States by Fiscal Condition: Iowa

Summary

On the basis of its fiscal solvency in five separate categories, Iowa ranks 28th among the US states for its fiscal health. On a short-run basis, Iowa has between 1.41 and 2.44 times the cash to cover short-term obligations. Revenues exceed expenses by 3 percent, and net position increased by $179 per capita in FY 2015. On a long-run basis, Iowa’s performance is stronger than other states. A net asset ratio of 0.17 indicates the state has assets remaining after paying its debts. Long-term liabilities are 21 percent of assets for a per capita long-term liability of $1,592. On a guaranteed-to-be-paid basis, unfunded pension liabilities are $43.7 billion, or 31 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. (Iowa ranks 28th.)
  • Budget solvency measures whether a state can cover its fiscal year spending using current revenues. Did it run a shortfall during the year? (Iowa ranks 32nd.)
  • 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? (Iowa ranks 10th.)
  • 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? (Iowa ranks 36th.)
  • 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? (Iowa ranks 25th.)

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

To read all our work on Iowa, go to mercatus.org/states/iowa.