State fiscal rankings Illinois is not last

by on July 11, 2017 at 2:23 pm in Data Source, Political Science | Permalink

There is a new Mercatus study by Eileen Norcross and Olivia Gonzalez, here is the bottom line:

TOP 5 STATES:
1) Florida
2) North Dakota
3) South Dakota
4) Utah
5) Wyoming

BOTTOM 5 STATES:
46) Maryland
47) Kentucky
48) Massachusetts
49) Illinois
50) New Jersey

My own state, Virginia, comes in above average at #18.

1 msgkings July 11, 2017 at 2:26 pm

How is Florida in such good shape? Isn’t their rep as a 3rd world manqué full of crooks and weirdos?

2 Alain July 11, 2017 at 3:28 pm

Their income tax brings in a tremendous amount of revenue.

3 msgkings July 11, 2017 at 3:34 pm

Droll.

4 Dick the Butcher July 11, 2017 at 4:32 pm

Well played.

I hadn’t known FL was in such fine fiscal condition.

I knew about WY and am looking at emigrating from NY. The main motivation is not fiscal, it’s the scenery and wildlife, but hugely lower real estate taxes don’t hurt.

Cautionary note: State financial statements are not rendered in accordance with GAAP.

Ranking states by objective measures such as huge/unsustainable long- and short-term debt obligations and unfunded public pension liabilities may ignore other factors that need analysis.

5 Anon_senpei July 11, 2017 at 3:29 pm

The progressive Open Records laws in Florida make it easy for journalists to get a hold of police reports on which to base their stories. Florida is also a populous state. These two factors could account for Florida’s reputation as a home to crooks and weirdos.

6 msgkings July 11, 2017 at 3:35 pm

Interesting. That plus Mar a Lago I guess.

7 Anonymous July 11, 2017 at 5:15 pm

The “Stand your Ground ” doesn’t hurt either.

8 Art Deco July 11, 2017 at 6:57 pm

People who fancy they’re going to have some fun beating the neighborhood watch captain’s head into the concrete get hurt..if he’s armed. (And he won’t need an immunity conferred by a stand your ground law; conventional self-defense works fine).

9 MOFO. July 11, 2017 at 10:31 pm

Stand your ground is one of those things thats a really big deal in the minds of people who dont really understand it, but is actually mostly nothing.

10 Careless July 11, 2017 at 11:14 pm

Has there actually been a famous case where stand your ground was at issue?

11 John Thacker July 12, 2017 at 6:53 am

“Stand your Ground” is popular with public defenders and defense attorneys, who strongly supported the bill. It mostly provides automatic procedural safeguards instead of relying on only police, prosecution, and jury discretion. Police and prosecutors hate it because of that.

Every state allows self-defense as a defense, just most of them it is very unevenly applied.

12 Doug July 11, 2017 at 6:07 pm

Very lenient bankruptcy laws don’t hurt. A large homestead exemption means we get a fair number of people fleeing creditors. E.g. Burt Reynolds.

13 msgkings July 11, 2017 at 6:26 pm

To be fair to Reynolds he is also a Florida native

14 The Other Jim July 12, 2017 at 10:09 am

And he was in “Gator.”

15 msgkings July 12, 2017 at 1:14 pm

Surely not a coincidence

16 msgkings July 12, 2017 at 1:15 pm

Surely that wasn’t a coincidence

17 athEIst July 11, 2017 at 9:05 pm

Don’t forget that WorldCom guy. Or did he build in Texas, the only other state having no cap on the homestead exemption in bankruptcy? I think the “estate” in this case was around 40 million.

18 mulp July 11, 2017 at 3:57 pm

Lots of Federal money flowing into Florida. Cuts in Federal money put a hurt on the Florida economy a decade ago. But Obamacare boosted the economy, creating jobs equal to cancelling STS, just different jobs.

“A George Washington University analysis estimates that 83,000 jobs will vanish from the Florida economy by 2026 if the AHCA passes. The Obamacare repeal would also axe the state’s Gross State Economic Product by a staggering $8.6 billion in that same timeframe. Those losses are expected to continue past 2026 if legislators don’t change anything by then.”
http://www.miaminewtimes.com/news/obamacare-repeal-bill-would-cost-florida-83000-jobs-cut-86-billion-from-economy-ahca-study-warns-9426646

I don’t think the tax cuts on the profits Trump earns not paying workers will cause him to cut his profits by paying a few thousand new workers at Mara Lago. Cutting taxes on not paying workers seems to me to increase the incentives to further cut the money paid to workers. And not paying 83,000 Florida workers will not increase the number of paying customers at Mara Lago, will it?

“According to the report, Florida stands to take the third-worst job hit in the nation, after only New York and Pennsylvania. In most states, Florida included, job rates and economic output would likely rise within the first few years of the bill’s implementation, because coverage-related spending wouldn’t quite keep up with the AHCA’s tax repeals. The job cuts would come directly from lost funding to the health-care industry and indirectly because consumers spend less on goods when health coverage becomes more expensive.”

I suppose the study should be dismissed because GW is a hotbed of radical leftist socialists….

19 zyxwvutsr July 11, 2017 at 4:17 pm

A “staggering $8.6 billion…”? $860 million a year in a more than $900 billion economy.

20 athEIst July 11, 2017 at 9:12 pm

8.6 billion is………8600 million. 1 billion = 1000 million. Innumerate much?

21 Dave July 11, 2017 at 9:57 pm

No need for the snark. The 8.6 billion over a decade means 860 million a year.

22 Careless July 11, 2017 at 11:16 pm

The illiterate calling others innumerate

23 Tanturn July 11, 2017 at 6:39 pm

Rich people + republican governance

24 anonymous on carrot Top July 11, 2017 at 10:30 pm

Pension plans paid for by residents of other states. Taxed, eventually, at the cash register. There are an awful lot of cash registers in Florida.

25 Ray Lopez July 12, 2017 at 12:17 am

Go here: http://www.taxpolicycenter.org/statistics/state-and-local-general-revenue-capita

Notice that Florida’s taxes per capita are actually higher than Georgia’s, despite the fact FL has no income tax. Sales taxes are higher in FL than GA, and property taxes are a bit higher. (Bonus trivia: notice also how much money NY state gets from the Feds, a fact that’s been blogged on here before; also note DC and WY get lots of Fed money)

26 anonymous on carrot Top July 12, 2017 at 12:25 am

rem acu tetigisti

27 buddyglass July 12, 2017 at 9:18 am

Tourism?

28 Anon July 11, 2017 at 2:32 pm
29 Lonely Libertarian July 11, 2017 at 2:33 pm

Florida has survived the bubble and a horrific round of foreclosure’s. But we are blessed with hordes of tourists – year round thanks to Disney and Universal who provide a nice bundle of sales tax dollars. Summers are way too hot and humid – but electric rates are pretty low so AC makes summer tolerable

30 athEIst July 11, 2017 at 9:19 pm

Florida, the 4H state, Hurricanes, Humidity, Heat, and Homoptera(and other insects. When I lived there 50 years ago at least it wasn’t crowded. I can’t imagine it now with almost four times the population.

31 Ray Lopez July 12, 2017 at 12:25 am

Thanks that’s interesting. “The Homoptera include the aphids, scale insects, cicadas, and leafhoppers, which all have sucking mouthparts.” Never been to FL but I can’t imagine the heat any worse than south Texas, around Brownsville. And outside the USA…that’s another story.

32 athEIst July 12, 2017 at 12:52 am

Actually a species of Coleoptera were the worst. Small, black and pink, and never seen not in a state of copulation they hatched out twice a year in prodigious numbers and immediately set about securing the succession for their successors and then died usually in piles several inches deep,

33 Harun July 12, 2017 at 12:00 am

California beats Florida, and yet…our state isn’t in the top 5.

But maybe its why were not in the bottom 5 either.

34 A Definite Beta Guy July 11, 2017 at 2:37 pm

Damn, this’ll just encourage Springfield and Chicago to spend even more money.

I guess we can always say we’re not as bad as Puerto Rico.

35 Deepish Thinker July 11, 2017 at 2:38 pm

“Illinois, not quite as bad as New Jersey”

The marketing campaign practically writes itself!

(Although, to be fair, while it may be more fiscally sound than New Jersey, Illinois does have more former governors in prison)

36 athEIst July 12, 2017 at 12:29 am

If they ever get Christie(Bridgegate) in jail N. J . will be ahead in sheer poundage.

37 Gabe Atthouse July 12, 2017 at 9:57 am

You should call into WFAN and make that joke. Christie is filling in for Fatseca, it’s been glorious.

38 Dzhaughn July 11, 2017 at 2:57 pm

(1) What do these rankings predict?

(2) Is it possible to run the current analysis on historical data? Has it been done? Cf. (1) above, but more it would be good to know the variance in rankings. It would be even better to know the distribution of scores and their historical variance in a continuous model or three. Who needs a Master’s project?

39 bluto July 11, 2017 at 3:05 pm

The paper is linked.

https://www.mercatus.org/system/files/norcross-fiscalrankings-2017-mercatus-v1.pdf

They use 13 ratios all numbers are taken from each state’s CAFR. So you could probably calculate those ratios going back a while (it appears CAFRs were popular going back to the 1970s).

40 Borjigid July 11, 2017 at 3:11 pm

Dunno about the weights – 70% to short term measures of solvency. Their justification seems to be out of date as well: “a weak cash or budget position presents an immediate problem for states in a recession”. Most, if not all, of these states are out of recession.

41 JWatts July 11, 2017 at 3:22 pm

It would be difficult to shore up your cash position as the economy weakens and you slide into recession. So, a state has to have a good cash position before a recession is obvious.

42 Borjigid July 11, 2017 at 3:40 pm

Sure, you want a good absolute cash position as you head into recession. But the measures they are using are all relative to other states.

Presumably there is some absolute cash buffer- 6 months expenses or whatever- that a state wants to keep on hand in case of recession. Anything in excess of that can be either kept around to juice the state’s current ratio, or invested in something that will improve long term-solvency. States that choose the former will do better on these rankings than those that choose the latter, but I would argue that they would actually be worse off.

43 JWatts July 11, 2017 at 7:03 pm

“or invested in something that will improve long term-solvency.”

I think you are ignoring common state level politics. That “investment” usually takes the form of a hand out to some favored group, whether it be in the form of free stuff or tax cuts will depend on the local political slant. But in either case, it’s unlikely to be used on something that actually will improve long term solvency.

44 Borjigid July 11, 2017 at 7:54 pm

Yes, its often the case that politicians describe things as investments that really are not. Other things are described as investments and really are- pension fund contributions were what I had in mind.

Looking at the big picture, its a little odd that you’re defending the weighting of the measures used in the paper while arguing that some of the scores don’t actually represent what they claim to representing. If the long-run solvency score represents pork handed out to favored groups instead of long run solvency, then the solution is to give it a weight of zero, not 10%.

45 byomtov July 12, 2017 at 6:34 pm

The weights are not even what they claim, since three of the items are the sum of three z-scores and two are the sum of two z-scores. That means the members of the first group are implicitly weighted at 150% of the in the second before the explicit weighting begins.

46 Bill July 11, 2017 at 3:15 pm

What happened to Kansas? Wisconsin? Texas?

From the report: “Alabama, Alaska, Colorado, Iowa, Kansas, Mississippi, Nebraska, New Mexico, Ohio, South Carolina, Texas, Washington, and Wisconsin worsened in the budget solvency ranking.”

47 GoneWithTheWind July 11, 2017 at 3:17 pm

The Ying and Yang of government is taxes and free stuff. Too much taxation pushes productive people and companies to go elsewhere and depresses the economy. Too much free stuff requires higher taxation and/or higher debt which pushes out the productive people and companies and depresses the economy. There is a balance but politicians believe in the old saying of “tax, tax, tax and spend, spend, spend”. It is how they get elected. They don’t really care about the productive people and companies or depressing the economy UNTIL it is so bad that the (B)ankruptcy word is thrown around. THEN, like politicians everywhere (and a lot of economists too) they think the solution is more taxation. “but this time they will pay down the debt and spend the revenues more responsibly… But that part of the bargain never happens. Thus it is an endless cycle of increasing taxes and increasing spending (free stuff) in the hopes of being reelected so that they can parlay this power into great personal wealth.

There is only one possible solution: A better class of politicians and ending or at least severely limiting free stuff. Don’t hold your breath.

48 Art Deco July 11, 2017 at 7:00 pm

There are only four sorts of free stuff traded in by state and local government which matter much: Medicaid, inflated pensions, shady contracting, and overstaffed offices. State university systems are overbuilt, but the cost of that is largely borne by their marks clientele.

49 JWatts July 11, 2017 at 3:24 pm

I think a 3 or 5 year rolling average for this kind of ranking would make sense. One good or bad year probably doesn’t effect a states position as much as the numbers would indicate.

50 rayward July 11, 2017 at 3:57 pm

Florida is a low tax, low spending state, its constitution prohibiting deficits. So Florida deserves its number one ranking. But Florida pays a price for its parsimony: congested highways, no transit, decaying infrastructure, bad schools, a low skilled work force, and roughly half its population of children living below the poverty level. What will Florida do when the oceans begin to rise and daily flooding results. You know the answer: Florida will look to the federal government to bail Florida out of its parsimony. Have a nice day.

51 Dzhaughn July 11, 2017 at 3:59 pm

Where as Illinois will look to the federal government to bail it out of its profligacy. Which is a much much better deal. For Illinois.

52 Slocum July 11, 2017 at 4:52 pm

“But Florida pays a price for its parsimony: congested highways, no transit, decaying infrastructure, bad schools, a low skilled work force, and roughly half its population of children living below the poverty level.”

All those problems must be why Florida has doubled its population since 1980 (passing New York a couple of years back). I’ve heard similar complaints about Georgia and the Carolinas, and — whoops — looks like the same inexplicable population explosions in those places too. Why didn’t the paucity of mass transit prevent all that in-migration? Puzzling!

53 Techy July 11, 2017 at 5:50 pm

Florida’s business model is to use their sunshine, property rights and low taxes to attract people who already have money: primarily retirees with steady social security checks, affluent asset-holders from South and Central America (and New England) avoiding taxes or confiscations.

Florida’s business model does not require significant investment in transit or human capital. They attract capital to their consumer economy rather than earn it through local productivity. Theirs is a perfectly viable model, just not one that will scale nationally or that can be duplicated in many other states.

54 mikeInThe716 July 11, 2017 at 6:52 pm

Statists whinge about the discrepancy in “contributions” between the high wage / cost blue States vs low wage / cost red States.

A huge part of that so-called problem is that many a wealthy retiree would sooner eat their Glock than retire in NY or other blue dump where they worked.

55 AnthonyB July 12, 2017 at 6:58 pm

Those born and bred in New York City want to retire in place, regardless of the age they have attained, since they are already in the center of the universe, cultural and otherwise.

56 Art Deco July 11, 2017 at 8:53 pm

Florida’s business model is to use their sunshine, property rights and low taxes to attract people who already have money: primarily retirees with steady social security checks, affluent asset-holders from South and Central America (and New England) avoiding taxes or confiscations.

The employment to population ratio nationally in 2014 was 0.59. That in Florida was 0.565. That in New York was 0.569. That in Michigan was 0.561. Again, the denominator in this ratio is the entire population over the age of 15, including the old.

57 Slocum July 11, 2017 at 8:58 pm

You’re talking about Florida growing from 10M people in 1980 to 20M now. 10M is a hell a lot of retirees and Latin American oligarchs. And note that Georgia and North and South Carolina have had similar levels of population growth in the same time period. Georgia’s population doubled from about 5 to about 10 million. So another 5M wealthy retirees and oligarchs there?

58 The Anti-Gnostic July 12, 2017 at 10:19 am

Sunshine, right-to-work, and low taxes.

59 athEIst July 12, 2017 at 4:39 pm

..affluent asset-holders from South and Central America…….
Wouldn’t rich foreign tax cheats be shorter and more accurate.

60 JWatts July 11, 2017 at 7:07 pm

“What will Florida do when the oceans begin to rise and daily flooding results.”

The worst case projections for global warming induced sea level rise are around 8 feet and the mean projection under 4 foot. So, Florida will not have a massive amount of inundated areas.

61 Dzhaughn July 11, 2017 at 7:58 pm

Or, the federal government will literally bail them out.

62 Cooper July 12, 2017 at 2:26 pm
63 JWatts July 12, 2017 at 5:24 pm

“4 feet of sea level rise = Miami Beach is completely gone”

Well yeah, Miami Beach was always marginal land. But remember this is an event occurring over the next 80+ years.

64 Art Deco July 11, 2017 at 8:29 pm

and roughly half its population of children living below the poverty level.

When you’re a dotty old lawyer, 23% translates into ‘roughly half’. (And it never occurs to you that this datum called the ‘poverty rate’ does not actually measure what it purports to measure).

65 PD Shaw July 11, 2017 at 3:58 pm

Illinois just raised taxes in the neighborhood of $4.75 billion per year and cut $2.5 billion in spending. The more important change though might be moving toward a hybrid defined benefit/contribution plan for new employees. It will be interesting to see the rankings next year. Look out Massachusetts!

66 Terry Richards July 11, 2017 at 4:10 pm

What is amazing about Florida is how much of the entire built environment is so god dam inefficient. It’s literally the poster child of post war suburban development from hell. Miles and miles of government built sprawl stretching on forever.

It’s as if none of Florida could survive without the government and Disney.

This analysis largely excludes southeast Florida, especially Miami.

67 Cooper July 11, 2017 at 7:12 pm

Under mid-range assumptions for climate change, large parts of Miami Beach become simply uninhabitable by the end of the century. Sea walls don’t help if the water bubbles up into your basement from the porous limestone underneath. It would only take a foot or two of sea level rise to make that happen.

At some point we’ll probably want to factor in the inevitable economic damages of climate change into these assessments.

68 Art Deco July 11, 2017 at 8:10 pm

Who in the South has a basement?

69 Chip July 11, 2017 at 11:32 pm

Tide gauges around Florida report a roughly 2mm annual rise in sea level – partly due to subsidence.

Miami is 1.8 meters above sea level.

Uninhabitable? Whatever.

70 Cooper July 12, 2017 at 3:12 pm

Chip, sea level rise is forecast to *accelerate*. You can’t take a linear projection.

https://www.ipcc.ch/pdf/unfccc/cop19/3_gregory13sbsta.pdf

If we limit warming to 2 degrees and CO2 concentrations peak at 450ppm in 2040, we still get over 2 feet of sea level rise.

There isn’t much evidence right now to suggest that we’re actually on track to meet the two degree mark. We’re pacing to blow past the 2 degree level. Does anyone seriously think we’re going to cap global CO2 concentrations in 2040 at 450ppm at this point? Of course not.

Three or four feet of sea level rise is entirely possible, if not probable, at this point.

I don’t want to drag this too far off track the initial topic of discussion but if we’re making pension/health care cost forecasts for the next half century, we should think about including climate change risks too.

71 Art Deco July 11, 2017 at 8:09 pm

Miles and miles of government built sprawl stretching on forever.

There’s no ‘government built’ anything. There are subsidies in the form of mortgage interest and derived from the GSEs in the secondary market, but that’s not going to account for much of the construction.

72 Terry richards July 11, 2017 at 10:16 pm

Would be literally impossible to visit any part of Florida and not view the entire state as one big peon to post war zoning-land use regulation and multi lane government roads…..

Literally the entire civilization of Orlando and Tampa is built around a multi lane government highway called I-4.

73 Harun July 12, 2017 at 12:02 am

No other states have highways.

74 Art Deco July 11, 2017 at 8:44 pm

It’s as if none of Florida could survive without the government and Disney.

Florida contains 80,000 federal civilian employees, 57,000 military, 424,000 state and local public employees. About 70,000 work at Disney World. That amounts to about 630,000 employees out of a working population of 8.5 million. Public agencies and Disney account for 7.4% of the working population, which is precisely the national mean.

75 Alan Goldhammer July 11, 2017 at 4:15 pm

Very surprised about the position of Maryland given all the government money that flows into the state (NIH, Walter Reed, etc.). Taxes seem to be covering all expenses. I guess I’ll have to read the paper to find out why my state is so bad off.

76 Stuart July 11, 2017 at 4:16 pm

Why isn’t DC included?

(I realize DC is not a state. But if you’re splitting hairs, you could also says PA, VA, KY, and MA are not technically states, they’re commonwealths)

77 charlie July 11, 2017 at 7:37 pm

I agree, annoying they don’t include it.

DC does ok on debt. There is a federal cap.

Also they have to keep a lot of cash around as a result of the feds.

No idea on the pension situation. can’t imagine it is good.

DC has a lot of fiscal strengths. Easy to raise the property tax. Income tax is already way high. Sales tax is about normal. You could raise it a bit.

$150M in parking tickets doesn’t hurt, either.

78 Cooper July 11, 2017 at 4:33 pm

Massachusetts has a lot of problems on the city and county level in terms of pension debt. Springfield was under state control from 2004 to 2009 in response to its near-bankruptcy. The city eventually got back local control but they weren’t making many pension contributions during that period and now the city has barely 25 cents on the dollar saved for its public sector workers.

Middlesex county, which is the 11th richest county in the country in terms of average weekly wages, has barely put away 45 cents on the dollar for its public sector pensions.

Short term cash balances are all well and good but I wish this ranking system weighted long run funding problems more heavily. You can fix a short term cash problem with short term borrowing. You can’t fix a massively underfunded pension system as easily.

https://www.bizjournals.com/boston/news/2016/06/09/attention-massachusetts-retirees-your-pension.html

79 JMCSF July 11, 2017 at 4:55 pm

In the average is over era, I wonder if New Jersey will face similar problems that Connecticut is now facing – Corporations relocating to urban cores, aging population, decline in manufacturing, etc.

80 g3 July 11, 2017 at 9:17 pm

New Jersey had the windfall of 9/11 occurring in Manhattan and data storage companies looking for real estate outside of the urban core to secure their data.

I’ve been told stories of Newark’s revitalization for the past decade plus. I don’t know if I buy it. What is irrefutable is the construction boom occurring in northern Jersey City. Real estate prices there are through the roof.

81 Gabe Atthouse July 12, 2017 at 10:10 am

+1 about 9/11 and data storage. Jersey City has seen remarkable growth, and for those of us who aren’t interested in dealing with the mass transit daily, there are tons of office parks within 50 miles of NYC.

82 Kevin- July 11, 2017 at 4:57 pm

What’s frustrating about this report is the focus on rankings, and not absolute condition. They’re grading on a curve, while the outcome is binary (at least I think it is: either a state sinks into fiscal insolvency, or it manages to stay solvent). A state is a “big mover” if it moves up or down 5 places, but what if that state is actually doing worse, but at least 5 other states are now doing much worse? If even the median state is in terrible shape, than that’s a scary picture, and it means the focus on “bottom five” is a recipe for a lot of states (i.e., the other 45) to ignore looming problems.

It seems to me the metric should be some measure of how close a given state is to fiscal insolvency. Something like a probability spread based on current economic projections and trends. I’m sure there are much more accurate and technical terms for what I’m trying to say, but I’m interesting in something like “using conservative estimates, state X has a 15-25% likelihood of becoming fiscally insolvent in the next 5 years.” It might turn out that only 2 or 3 states are in a critical zone (50% or greater chance of being broke), or it might end up that it’s a much higher number.

83 mikeInThe716 July 11, 2017 at 7:00 pm

And for true fiscal geek fun, they could add two hyper-extreme (foreign) States, like Switzerland and Venezuela.

84 Kevin- July 11, 2017 at 9:19 pm

Not looking for geeky fun, just trying to find information that is actually meaningful.

85 rtd July 11, 2017 at 4:57 pm

Kansas & Wisconsin aren’t at the bottom??? Makes me wonder how (the biased) half of econbrowser.com will spin this…

86 byomtov July 11, 2017 at 5:25 pm

Really, Tyler? Really?

Tell us honestly how valid the methods used in this study are. The authors use a hodge-podge of correlated metrics, ignore the absolute cash amounts involved, sum rather silly Z-scores and then use arbitrary weights to arrive at their rankings. If Mercatus considers this serious scholarship, and I guess it does, something is badly wrong there.

87 thfmr July 11, 2017 at 8:04 pm

So hostile. Enlighten us with your better formula.

88 Art Deco July 11, 2017 at 8:45 pm

The ‘better formula’ is the one that makes California and Massachusetts look good.

89 byomtov July 11, 2017 at 9:49 pm

The ‘better formula’ is the one that makes California and Massachusetts look good.

Well, it’s not the one that makes Kansas or Oklahoma look good.

It’s easy to look good if you decide not to spend any money on anything and to close the schools because you can’t pay the teachers.

90 Careless July 11, 2017 at 11:46 pm

Well, it’s not the one that makes Kansas or Oklahoma look good.

Why not? Easy to raise taxes and increase revenue when they’re low. Illinois is driving residents away

91 byomtov July 11, 2017 at 9:42 pm

Any formula is better than random numbers.

One could look at state credit ratings, and interest levels on state bonds. That would give the much beloved market assessment of state finances.

My point, hostile or not, is that the methods employed here are statistical nonsense, gibberish, and Tyler knows it. His endorsement of the results does him serious discredit.

92 Gabe Atthouse July 12, 2017 at 10:50 am

1) Why do you think the credit rating agencies are any more credible? I haven’t looked through the Mercatus methodology, and I’m sure it leaves much to be desired, but wouldn’t you say the ratings agencies are flawed? They use models that are more complicated but no more accurate. I don’t care if they run 10,000 stochastic scenarios, they have to make loads of assumptions as well. I DO think that looking at interest rates on new bond issues would be a useful place to start, but even that’s flawed because states with higher demand will drive down yields from the in state tax benefits.
2) Tyler didn’t “endorse” the paper any more than he endorses the 6 or so article that he links to every day.

93 byomtov July 12, 2017 at 6:25 pm

Why do you think the credit rating agencies are any more credible? I haven’t looked through the Mercatus methodology, and I’m sure it leaves much to be desired, but wouldn’t you say the ratings agencies are flawed?

I didn’t say they were perfect. But they do use methods that make some sense.

I haven’t looked through the Mercatus methodology,

I suggest you do so before defending it.

Tyler didn’t “endorse” the paper any more than he endorses the 6 or so article that he links to every day.

No? Tyler is chairman and general director of the Mercatus Center. When he touts a paper published by Mercatus, I think it is fair to say he endorses it, or at least to thinks the methods used make sense – in this case much to his discredit.

94 byomtov July 11, 2017 at 7:00 pm

From the appendix, which uses AL as an example:

Alabama’s cash solvency score is two standard deviations above the mean
value for the 50 states. Alabama is ranked 9th among the states for cash solvency.

This “cash solvency score” is the sum of three highly correlated Z-scores. Does that even make sense?

Then other scores are calculated as the sum of either two or three z-scores.

Then weights are pulled out of thin air, bizarrely calculated scores are multiplied by these arbitrary weights and the products added up. Very weird.

What grade would a senior economics major get on this paper?

95 Just Saying July 11, 2017 at 10:02 pm

Mercatus.
Got it.

96 Affe July 11, 2017 at 10:17 pm

You’ll always be Jersey, Tyler.

97 Aretino July 12, 2017 at 9:42 am

Why is Colorado just average? We have all that marijuana money coming in, plus we have the TABOR law, which restricts government spending.

98 tom mullaney July 12, 2017 at 9:53 am

Where is Connecticut? DUH?

99 Marc July 12, 2017 at 9:55 am

The Florida *problem* is solved by adding into the metrics a penalty for 1:100 year natural disasters.

California probably doesn’t move much, as California has better solved their risk with the CEA. Florida, in contrast, is, well, a disaster waiting to happen. Florida is in better shape than 10 years ago, but they still require a federal bailout on a graind scale following a major hurricane.

I suppose Californians know they cannot count on a federal bailout with a GOP president. Florida knows they are *always* a swing state?

100 Slugger July 12, 2017 at 10:36 am

I am often frustrated by state to state comparisons. In this one the top five states are one state with a large population and four states whose combined population is less than a thirty mile radius around Miami. Can sparsely populated NoDak with a recent petroleum boom really be compared to other states. It should be compared to Saudi Arabia; both have harsh environments, oil wealth, and few people. I also get annoyed by colored electoral maps. Montana is huge but has few people; Connecticut is small but densely populated. The inhomogeneity of the states make these comparisons hard.

101 Careless July 12, 2017 at 10:44 am

Can sparsely populated NoDak with a recent petroleum boom really be compared to other states.

Yes, when the question is fiscal solvency. Any other questions?

102 David July 12, 2017 at 11:00 am

I believe data are for FY15, so this is on a bit of a lag.

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