Congressmen, presidents and bureaucrats from both political parties have generated an $18 trillion national debt and the most sluggish economy since the 1930s, but state officials across the country are no slouches in running up huge debts and hobbling their economic climates.
The result is some states are busted, with sluggish economies, while others are busting loose with growing economies and more opportunity. The reasons for both aren’t hard to find, they’re all in the numbers.
Take California and New York, for example, two states that have had big-spending governors and legislators for decades. Based on data compiled by statedatalab.org and Open The Books, residents of both states may want to prepare for hard times ahead.
California has $328 billion in debts, compared to only $94 billion in assets, for a deficit of $234 billion. If debt holders all tell state officials to pay up in 2016, every Californian will have to pay an additional $20,800 in taxes.
Similarly, New York has $257 billion in debt and $130 billion in assets. That makes the Empire State’s deficit $127 billion, or about half of California’s. Even so, if the debts all come due next year, it will mean another $20,700 in taxes for New Yorkers.
Why do California and New York have so much debt? High public employee salaries and benefits play a huge role in it. According to Open The Books, lifeguards on California’s Pacific Coast can make as much as $212,000 annually, then draw an exceptionally generous pension on retirement. And in New York, a librarian in the Queens section of New York City can make more than $391,000 annually.
Ranked according to the difference between their assets and debts, California is at the bottom of the 50 states, while New York ranks 47th. But as the adjoining chart illustrates, other states are in bad shape, too. See how all 50 states rank here.
Residents of New Jersey, which ranks 48th with a deficit of $161 billion, would have to collect $52,800 from each of its residents to pay off its debts, or more than twice as much as New York and California residents.
Illinois, with a deficit of $184 billion, would have to boost its take from each resident by $45,000 to pay off all of its debts. The other six states in the bottom 10 by deficit are Massachusetts, Pennsylvania, Texas, Connecticut, Michigan, Kentucky and Maryland.
Then there are states like Alaska, Wyoming and North Dakota where prudent state management mean each resident could get huge bonuses instead of higher taxes.
Alaska has a $14 billion surplus, making for a $52,300 bonus. In North Dakota, the surplus is $8 billion and the potential payoff would be $28,400. In Wyoming, the figures are $5 billion and $22,500, according to statedatalab.org.
Other top 10 states are Utah, Oregon, Tennessee, Nebraska, South Dakota, Idaho and Iowa. Montana is the only other state with a positive bottomline when debts and assets are compared. See the accompanying chart below for data on all 50 states.
But before anybody starts packing to move to one of those top 10 states, there are other meaningful ways of measuring the relative health of states’ financial management and economic health.
Forbes contributor and investment analyst William Baldwin calculated each state’s FeedMe Ratio by comparing how many people within its borders depend upon taxes generated by taxpayers working outside of government.
New Mexico has the highest FeedMe ratio, with 142.6 persons depending upon taxes paid by 100 residents. Second highest is West Virginia at 115.8, followed by California at 114.3. The other seven states in the FeedMe bottom 10 are Mississippi, New York, Arkansas, Kentucky, Arizona, Oregon and Vermont.
States that do well on the FeedMe ratio are led by North Dakota, which has a mere 42.7 residents depending upon the labors of 100 residents. Vermont is second lowest on this score with 45 and Nebraska is third with 46.9.
The remaining seven states with the lowest FeedMe ratios are New Hampshire, Virginia, South Dakota, Kansas, Missouri, Wisconsin and Wyoming. Go here to see how all 50 states rank on the Baldwin FeedMe ratio.
“The hazard with overburdened states is that the departure of jobs could someday turn into a rout. Just this is happening in Puerto Rico,” Baldwin said in Forbes. “Its productive citizens are leaving for the mainland. They are sticking a dwindling population of private-sector workers with the burdens of supporting the government’s clients and paying off the government’s debt.”
Note that North Dakota ranks first on the FeedMe ratio and second on the debts-to-assets calculation. Could it be that officials in the Peace Garden State have discovered how to square the circle?
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