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Sunny solvency

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  • | 11:00 a.m. August 4, 2017
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Cities and counties across Florida are facing budget shortfalls in pensions and other unfunded liabilities — some at emergency levels.

Yet the state itself is a champion of fiscal solvency, according to a new report from the Mercatus Center at George Mason University.

The study analyzed five financial metrics: cash solvency; budget solvency; long-run solvency; service-level solvency, or how much “fiscal slack” a state has to increase spending if citizens demand more services; and trust fund solvency, or the size of a state's unfunded pension and health care liabilities. The report looked at fiscal years 2013-2015.

Florida ranked No. 1 overall on the survey. It was the only major population state in the top five, outdoing North Dakota, South Dakota, Utah and Wyoming, ranked No. 2 through No. 5, respectively. Fiscal purgatory states — Massachusetts, Illinois and New Jersey — made the bottom three, with New Jersey securing No. 50.

In Florida specifically, the report shows, the state spreads around its solvency:

• On a short-run basis, Florida has between 8.19 and 10.01 times the cash needed to cover short-term obligations. Revenues exceed expenses by 7%, and the state's net position improved by $279 per capita;

• For long-term, net assets are 10% of total assets, and long-term liabilities are 34% of total assets, or $2,303 per capita, roughly half the average nationwide;

• Unfunded pension obligations, on a guaranteed-to-be-paid basis, are $197.65 billion, or 22% of state personal income. The unfunded obligations figure, while high looking at the Sunshine State individually, is one of the better ones nationally.

The report's authors, Eileen Norcross and Olivia Gonzalez, stress that while the numbers are big in the report, having sound fiscal policy isn't complicated. (Read: Run it like a business, or a sound family budget.)

“Top-performing states tend to exhibit fiscal discipline in the form of having high levels of cash, maintaining revenues that exceed expenses and keeping debt levels low relative to resident income,” the report states. “These factors can easily be threatened if a state relies too heavily on narrow tax bases and volatile revenue sources or if pension plans are not adequately funded, leading to persistently large and growing liabilities.”


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