North Carolina has been named one of the top five states in the nation in terms of budget solvency, a key measure of fiscal health, according to a Mercatus Center report released today.
The same report also looked at other fiscal measures, two of which had the state in the top 10.
A couple of others, however, were closer to the middle of the pack. The overall ranking showed a significant improvement since last year.
The Mercatus Center is a project of George Mason University, and each year releases rankings on the states based on a number of financial measures.
“While some on the other side of the aisle are doing everything they can to discredit our conservative budgeting approach of spending restraint and middle-class tax relief, the data speaks for itself,” Senate Leader Sen. Phil Berger (R-Rockingham) said. “While most other states are struggling with revenue shortfalls, North Carolina is among the top five states in the nation for budget solvency.”
North Carolina ranks in the top 15 states overall in overall fiscal condition. This year’s rank is an improvement from last year, when the state was ranked 21st in the nation.
Leading the overall list are Florida, North Dakota, South Dakota, Utah and Wyoming.
Coming in as the least fiscally healthy states are New Jersey, Illinois, Massachusetts, Kentucky and Maryland.
The Center looks at five measures of solvency to gauge overall fiscal condition: cash solvency, budget solvency, long-run solvency, service-level solvency, and trust fund solvency.
Solvency is a measure of whether a body has the financial assets to meet certain sectors of its expenses.
Budget solvency, NC’s strong suit, refers to how a state can cover its fiscal-year spending commitments.
The state was no slouch in terms of long-run solvency, finishing 8th, and trust fund solvency, finishing 7th. The latter evaluates the state’s unfunded pension and healthcare liabilities.
Things were less rosy in two other categories.
Cash solvency measures a state’s ability to handle its short-term bills, an area in which North Carolina is ranked 29th.
In addition to its relatively low cash solvency rating, the state’s overall ranking was hurt by its service-level solvency ranking of 17th in the nation. Service-level solvency is a measure of how state spending levels relate to the income level of the population of the state, and the state’s ability to handle increased tax levels if need be without harming the economy.
While North Carolina’s cash solvency ranking was below average, the state has seen an increase in its cash to short-term liabilities ratio from 2013 to 2105, increasing from 153 percent to 226 percent.
Short-term cash solvency was the only category in which the state was below the national average.
The state has also been improving in its percentage of revenue to expenses in that time frame, increasing from revenues being 106 percent of expenses in 2013 to 112 percent in 2015.
In terms of long-term liabilities, the state has also been improving, dropping from liabilities equaling 22 percent of total assets in 2013 to 17 percent of total assets in 2015.
Where the state did not improve was in terms of unfunded liabilities, where the state increased its percentage of pension costs to state revenue from 17 percent of total income in 2013 to 22 percent in 2015.
In 2015 the state had approximately $90 billion in unfunded liabilities.
In terms of borrowing power, the state got more fiscal good news last month. Fitch, a top crediting agency, awarded North Carolina an ‘AAA’ bond rating, citing the state’s “low liabilities, conservative financial operations and long-term prospects” in its decision to keep North Carolina at the top of the rating scale.