How well run are America’s 50 states? The answer depends a lot on where you live.
Every
year, 24/7 Wall St. conducts an extensive survey of all fifty states in
America. Based on a review of data on financial health, standard of
living and government services by state we determine how well each state
is managed. For the first time, North Dakota is the best run.
California is the worst run for the second year in a row.
The
successful management of a state is difficult to measure. Factors that
affect its finances and population may be the result of decisions made
years ago. A state’s difficulties can be caused by poor governance or by
external factors, such as extreme weather.
[More from 24/7 Wall St.:
America’s Poorest States]
A
state with abundant natural resources should have an easier time
balancing its budget than one starved for resources. Regional problems
or the national decline of certain industries can destroy local
economies. The subprime mortgage crisis, for example, disproportionately
affected states with strong construction and real estate markets. Such
factors can be easily identified and noted as possible causes for a
state’s poverty levels, unemployment, or strained coffers.
Despite
this, it is the responsibility of each state to deal with the resources
at its disposal. Each government must anticipate economic shifts and
diversify its industries and attract new business. A state should be
able to raise enough revenue to ensure the safety of its citizens and
minimize hardship without spending more than it can prudently afford.
Some states have historically done this much better than others.
To
determine how well the states are run, 24/7 Wall St. reviewed hundreds
of data sets from dozens of sources. We looked at each state’s debt,
revenue, expenditure and deficit to determine how well it is managed
fiscally. We reviewed taxes, exports, and GDP growth, including a
breakdown by sector, to identify how each state is managing its
resources. We looked at poverty, income, unemployment, high school
graduation, violent crime and foreclosure rates to measure if residents
are prospering.
The best-run states have certain characteristics
in common, as do the worst run. The high-ranking states all have
well-managed budgets. Each of the top ten has a perfect, or
near-perfect, credit rating from Standard & Poor’s, Moody’s, or
both. Of the ten worst-ranked, only three received top scores from one
agency, and none from both. California is currently the only state rated
A- by S&P, the lowest score given to any state. These poor-ranked
states have high debt relative to both income and expenditure.
There
is a strong correlation between well-educated populations and generally
well-managed states. Of the ten best-scoring states on our list, nine
have among the highest percentages of adults with high school diplomas.
[More from 24/7 Wall St.:
The 12 Companies Paying Americans the Least]
Employment
is also closely correlated to how well a state is managed. The
unemployment rates of most of the poorly ranked states are among the
highest in the country. Nine of the ten best-ranked states had an
unemployment rate of less than 7% in 2011. This includes North Dakota,
which had the lowest rate in the country in 2011, at just 3.6%. The
average unemployment rate nationwide was 8.9% in 2011.
Best-Run States:1. North Dakota
Thinkstock> Debt per capita: $3,282 (22nd lowest)
> Budget deficit: None
> Unemployment: 3.5% (the lowest)
> Median household income: $51,704 (20th highest)
> Pct. below poverty line: 12.2% (13th lowest)
For
the first time, North Dakota ranks as the best run state in the
country. In recent years, North Dakota’s oil boom has transformed its
economy. Last year, crude oil production rose 35%. As of August, 2012,
it was the second-largest oil producer in the country. This was due to
the use of hydraulic fracturing in the state’s Bakken shale formation.
The oil and gas boom brought jobs to North Dakota, which had the
nation’s lowest unemployment rate in 2011 at 3.5%, and economic growth.
Between 2010 and 2011, North Dakota’s GDP jumped 7.6%, by far the
largest increase in the nation. This growth has also increased home
values, which rose a nation-leading 29% between 2006 and 2011. North
Dakota and Montana are the only two states that have not reported a
budget shortfall since fiscal 2009.
2. Wyoming
Thinkstock> Debt per capita: $2,694 (18th lowest)
> Budget deficit: 10.3% (32nd largest)
> Unemployment: 6.0% (7th lowest)
> Median household income: $56,322 (13th highest)
> Pct. below poverty line: 11.3% (6th lowest)
Wyoming
is not the best-run state in the nation this year. The drop is largely
due to the state’s contracting economy. In 2011, GDP shrunk by 1.2%,
more than any other state. As a whole, however, the state is a model of
good management and a prospering population. The state is particularly
efficient at managing its debt, owing the equivalent of just 20.4% of
annual revenue in fiscal 2010. Wyoming also has a tax structure that,
according to the Tax Foundation, is the nation’s most-favorable for
businesses — it does not have any corporate income taxes. The state has
experienced an energy boom in recent years. The mining industry, which
includes oil and gas extracting, accounted for 29.4% of the state’s GDP
in 2011 alone, more than in any other state. As of last year, Wyoming’s
poverty, home foreclosure, and unemployment rates were all among the
lowest in the nation.
3. Nebraska
Thinkstock> Debt per capita: $1,279 (2nd lowest)
> Budget deficit: 9.7% (34th largest)
> Unemployment: 4.4% (2nd lowest)
> Median household income: $50,296 (22nd highest)
> Pct. below poverty line: 13.1% (tied-15th lowest)
Last
year, Nebraska had the second-lowest unemployment rate in the nation at
4.4%. In Lincoln, the state capital, the unemployment rate was 4%,
lower than all metropolitan areas in the country, except Bismarck and
Fargo in North Dakota. Although far from the nation’s wealthiest state —
median income was slightly lower than the U.S. median of $50,502 —
Nebraska’s economy is strong relative to the rest of the U.S. The state
is one of the leading agricultural producers, with the sector accounting
for 8.3% of the state’s GDP last year. The state also had the
second-lowest debt per capita in the country in fiscal 2010, at $1,279,
compared to an average of $3,614 for states nationwide.
4. Utah
Thinkstock> Debt per capita: $2,356 (15th lowest)
> Budget deficit: 14.7% (25th largest)
> Unemployment: 6.7% (tied-11th lowest)
> Median household income: $55,869 (14th highest)
> Pct. below poverty line: 13.5% (tied-17th lowest)
In
fiscal 2011, Utah had a budget deficit of $700 million, equal to 14.7%
of the state’s GDP. This debt-to-GDP ratio is worse than half the states
in the U.S. Despite these problems, Utah has committed to reducing
expenses in place of raising taxes or increasing debt. The state has
also limited its borrowing. Its total debt was just under $6.5 billion
in fiscal 2010, or $2,356 per capita — less than most states — and 40.4%
of 2010 tax revenue. Both Moody’s and S&P gave Utah their highest
credit ratings because of the state’s strong fiscal management. Moody’s
commented that Utah has a “tradition of conservative fiscal management;
rebuilding of budgetary reserves after their use in the recession; [and]
a closely managed debt portfolio.”
5. Iowa
Thinkstock> Debt per capita: $1,690 (7th lowest)
> Budget deficit: 20.3% (18th largest)
> Unemployment: 5.9% (6th lowest)
> Median household income: $49,427 (24th highest)
> Pct. below poverty line: 12.8% (14th lowest)
Like
many of the other well-run states, Iowa is one of the nation’s top
agricultural centers — the industry accounted for 6.6% of the state’s
GDP in 2011. The farm economy has contributed significantly to growth,
with farm earnings rising rapidly and land values skyrocketing. State
GDP rose by 1.9% between 2010 and 2011 — the 12th-highest increase in
the country. Iowa’s unemployment rate fell from 6.3% in 2010 to just
5.9% in 2011, the nation’s sixth-lowest rate. The state has carried a
low debt burden in recent years, averaging just $1,690 per capita in
fiscal 2010, among the nation’s lowest. The state currently has the best
possible credit ratings both from Moody’s and S&P.
Worst-Run States:
50. California
Thinkstock> Debt per capita: $4,008 (18th highest)
> Budget deficit: 20.7% (17th largest)
> Unemployment: 11.7% (2nd highest)
> Median household income: $57,287 (10th highest)
> Pct. below poverty line: 16.6% (18th highest)
California
is 24/7 Wall St.’s “Worst Run State” for the second year in a row. Due
to high levels of debt, the state’s S&P credit rating is the worst
of all states, while its Moody’s credit rating is the second-worst. Much
of California’s fiscal woes involve the economic downturn. Home prices
plunged by 33.6% between 2006 and 2011, worse than all states except for
three. The state’s foreclosure rate and unemployment rate were the
third- and second-highest in the country, respectively. But efforts to
get finances on track are moving forward. State voters passed a ballot
initiative to raise sales taxes as well as income taxes for people who
make at least $250,000 a year. While median income is the 10th-highest
in the country, the state also has one of the highest tax burdens on
income. According to the Tax Foundation, the state also has the
third-worst business tax climate in the country.
49. Rhode Island
Thinkstock> Debt per capita: $9,018 (3rd highest)
> Budget deficit: 13.4% (28th largest)
> Unemployment: 11.3% (3rd highest)
> Median household income: $53,636 (17th highest)
> Pct. below poverty line: 14.7% (24th lowest)
Rhode
Island’s finances were a mess in fiscal 2010. The state had $9.5
billion in unpaid debts, which came to 107.2% of that year’s revenues.At
more than $9,000 per person, it’s one of the largest debt burdens in
the country. The state also funded less than half of its pension
obligations, worse than all states except for Illinois. In 2010, in a
spectacular example of fiscal mismanagement, the state guaranteed a $75
million loan to a video game company, which has since defaulted. With
one of the nation’s slowest growth rates and the third-highest
unemployment rate in the U.S., at 11.3%, Rhode Island’s economy
performed poorly overall.
48. Illinois
Thinkstock> Debt per capita: $4,790 (11th highest)
> Budget deficit: 40.2% (2nd largest)
> Unemployment: 9.8% (tied-10th highest)
> Median household income: $53,234 (18th highest)
> Pct. below poverty line: 15.0% (25th highest)
Although
many states have budget issues, Illinois’ faces among the biggest
problems. In 2010, the state’s budget shortfall was more than 40% of its
general fund, the second-highest of any state. Both S&P and Moody’s
gave Illinois credit ratings that were the second-worst of all states.
In addition, the state only funded 45% of its pension liability in 2010,
the lowest percentage of any state. Governor Patrick Quinn has made the
now-$85 billion pension gap a top priority for the new legislative
session beginning in January.
47. Arizona
Thinkstock> Debt per capita: $2,188 (12th lowest)
> Budget deficit: 39.0% (3rd largest)
> Unemployment: 9.5% (tied-13th highest)
> Median household income: $46,709 (21st lowest)
> Pct. below poverty line: 19.0% (tied-8th highest)
Between
2006 and 2011, the value of homes in Arizona tumbled by 35%, more than
every state except for Nevada. The state also had the nation’s
second-highest foreclosure rate in 2011, with one in every 24 homes in
foreclosure. In the aftermath of the financial crisis, Arizona had some
of the nation’s largest budget shortfalls. In fiscal 2010, the state had
a shortfall of $5.1 billion, equal to 65% of its general fund. In
fiscal 2011, Arizona’s budget deficit was 39.0% of its general fund, the
third-highest in the nation. In the recent state elections, residents
voted on several measures intended to shore up the state’s finances.
Voters rejected the continuation of a sales tax hike, while approving
the restructuring of the state’s property tax assessment system.
46. New Jersey
Thinkstock> Debt per capita: $6,944 (5th highest)
> Budget deficit: 38.2% (4th largest)
> Unemployment: 9.3% (14th highest)
> Median household income: $67,458 (3rd highest)
> Pct. below poverty line: 10.4% (3rd lowest)
Between
2010 and 2011, New Jersey’s GDP contracted by 0.5%, more than all but
three other states. The state’s median household income and poverty rate
were both third best in the nation. On the other hand, the state’s tax
burden on its residents was second highest in the U.S. in 2010.
Residents paid 12.4% of their income in state and local taxes, higher
than any other state except New York. The state has many budget
problems, as well. New Jersey’s debt as a percentage of revenue was
91.6%, the fifth-highest of all states.
How did your state do?
Click here for the full list of the best- and worst-run states.Methodology:24/7
Wall St. considered data from a number of sources, including Standard
& Poor’s, the Bureau of Labor and Statistics, the U.S. Census
Bureau, the Tax Foundation, RealtyTrac, The Federal Bureau of
Investigation and the National Conference of State Legislators.
Unemployment
data was taken from the U.S. Bureau of Labor Statistics. Credit ratings
were from ratings agencies S&P and Moody’s. We relied on the FBI’s
Uniform Crime Report for violent crime rate by state and large
metropolitan areas. RealtyTrac provided foreclosure rates.
A
significant amount of the data we used came from the U.S. Census
Bureau’s American Community Survey. Data from ACS included percentage of
residents below the poverty line, high school completion for those 25
and older, median household income, percentage of the population without
health insurance and the change in median home values from 2006 to
2011. These are the values we used in our ranking.
Once we
reviewed the sources and compiled the final metrics, we ranked each
state based on its performance in all the categories. All data are for
the full year 2011, with the exception of debt per capita, obtained from
the Tax Foundation, and state budgetary data, which came from the U.S.
Census Bureau, and is for fiscal year 2010. New to this year’s study was
our more detailed review of state industry for 2011, from the the
Bureau of Economic Analysis, exports per capita for 2011, from the
Census Bureau, and the 2010 tax burden and the current tax business
climate, from the Tax Foundation.
Robert Griffin III and his fiancée Rebecca Liddicoat (Getty)Washington Redskins quarterback Robert Griffin III is living a pretty good life.
