NCPA - National Center for Policy Analysis

Healthcare and its Financial Costs to States

July 10, 2015

With new spending commitments for Medicaid and growing long-term obligations for pensions and health care benefits, states must be ever vigilant to consider both the short- and long-term consequences of policy decisions, according to Eileen Norcross of the Mercatus Center. Understanding how each state is performing in regard to a vari­ety of fiscal indicators can help state policymakers as they make these decisions. 

By looking at states' basic financial statistics on revenues, expenditures, cash, assets, liabilities, and debt, states may be ranked according to how easily they will be able to cover short term and long-term bills, including pensions.

  • Alaska, North Dakota, South Dakota, Nebraska, and Florida rank in the top five financially healthy states.
  • Illinois, New Jersey, Massachusetts, Connecticut, and New York rank in the bottom five financially healthy states, largely owing to low amounts of cash on hand and large debt obligations.

High deficits and debt obligations in the forms of unfunded pensions and health care benefits continue to drive each state into fiscal peril. Each holds tens, if not hundreds, of billions of dollars in unfunded liabilities — constituting a significant risk to taxpayers in both the short and the long term.

Most states are nearly back to normal since the Great Recession, although there are troubling signs that many states are still ignoring the risks on their books, mainly in underfunded pensions and health care benefits. Even states that appear to be fiscally robust -- perhaps owing to large amounts of cash on hand or revenue streams from natural resources -- must take stock of their long-term fiscal health before making future public policy decisions.

Source: Eileen Norcross, "Ranking States by Fiscal Condition," Mercatus Center, July 7, 2015.


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