July 11, 2017

#48 | Ranking the States by Fiscal Condition: Massachusetts

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Summary

On the basis of its fiscal solvency in five separate categories, Massachusetts is ranked 48th among the US states for its fiscal health. On a short-run basis, Massachusetts holds between 45 percent and 111 percent of the cash needed to cover short-term obligations. Revenues cover 96 percent of expenses, and net position decreased by $319 per capita in FY 2015. On a long-run basis, a net asset ratio of −1.84 points to a heavy reliance on debt and large unfunded obligations. Long-term liabilities are 239 percent of total assets, for a per capita long-term liability of $9,919. Total primary government debt is $28.43 billion, or 6.9 percent of personal income, nearly twice the average in the states. The best score for Massachusetts was for trust fund solvency. On a guaranteed-to-be-paid basis, unfunded pension obligations are $115.75 billion, or 28 percent of state personal income. OPEB is 4 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. (Massachusetts ranks 49th.)
  • Budget solvency measures whether a state can cover its fiscal year spending using current revenues. Did it run a shortfall during the year? (Massachusetts ranks 48th.)
  • 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? (Massachusetts ranks 48th.)
  • 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? (Massachusetts ranks 34th.)
  • 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? (Massachusetts ranks 19th.)

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

To read all our work on Massachusetts, go to mercatus.org/states/massachusetts.