July 11, 2017

#45 | Ranking the States by Fiscal Condition: Pennsylvania

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Summary

On the basis of its fiscal solvency in five separate categories, Pennsylvania is ranked 45th among the US states for its fiscal health. On a short-run basis, Pennsylvania has between 71 percent and 136 percent of the cash needed to cover short-term obligations, which is among the lowest in the country. Revenues exceed expenses by 2 percent, and net position improved by $111 per capita in FY 2015. On a long-run basis, Pennsylvania’s negative net asset ratio of 0.27 points to the use of debt and large unfunded obligations. Long-term liabilities are 59 percent of total assets. Unfunded pension liabilities, on a guaranteed-to-be-paid basis, are $201.17 billion, or 32 percent of state personal income. OPEB is 3 percent of 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. (Pennsylvania ranks 47th.)
  • Budget solvency measures whether a state can cover its fiscal year spending using current revenues. Did it run a shortfall during the year? (Pennsylvania ranks 38th.)
  • 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? (Pennsylvania ranks 36th.)
  • 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? (Pennsylvania ranks 21st.)
  • 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? (Pennsylvania ranks 26th.)

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

To read all our work on Pennsylvania, go to mercatus.org/states/pennsylvania.