SALT LAKE CITY — Utah ranks seventh in the country for its financial fitness, a new study shows.
The Mercatus Center at George Mason University ranked each state’s fiscal health based on short- and long-term debt and other obligations, such as unfunded pensions and health care benefits.
On a cash basis, Utah has between 4.17 and 6.25 times the cash needed to cover short-term liabilities. Revenues exceed expenses by 14 percent, for a surplus of $500 per capita, according to the report.
Net assets are 29 percent of total assets, and total liabilities are 18 percent of total assets, the study shows. Total debt is $4.9 billion. Unfunded pension liabilities are $29.8 billion on a guaranteed-to-be-paid basis, and other post-employment benefits are $267 million.
Those liabilities are equal to 31 percent of total state personal income, according to the study.
Juliette Tennert, director of economics and public policy at the University of Utah's Kem C. Gardner Policy Institute, said it's no surprise Utah ranks well for fiscal health.
"We have a resilient and diverse economy and prudent fiscal policies," she said.
The report looked at and ranked each state in five categories of financial solvency:
• Cash solvency — Does a state have enough cash on hand to cover its short-term bills? Utah ranked sixth.
• Budget solvency — Can a state cover its fiscal year spending with current revenues, or does it have a budget shortfall? Utah ranked fifth.
• Long-run solvency — Can a state meet its long-term spending commitments and will there be enough money to cushion it from economic shocks? Utah ranked 16th.
• Service-level solvency — How much “fiscal slack” does a state have to increase spending if residents demand more services? Utah ranked 12th.
• Trust fund solvency — How much debt does a state have? How large are its unfunded pension and health care liabilities? Utah ranked 26th.
"You shouldn't have to be a budget expert to know where your state stands financially," according to Eileen Norcross, a senior research fellow at the Mercatus Center and author of the study. "These rankings give everyone that chance by putting complicated annual financial reports into context, while still allowing experts to take a deeper look at the numbers."
Tennert said Utah has a young and growing population, which on balance is a boon to the state but does present some challenges.
The state has the highest ratio of children, who don’t pay taxes, to working-age adults in the nation. Growth brings increasing road, water and sewer needs, and the use of debt is one way to pay for them, she said.
As a result, Tennert said, Utah ends up ranking about average in long-run and trust fund solvency measures.
Still, Utah is among a handful of states with a AAA bond rating from all three rating agencies, in part because it automatically transfers budget surpluses to a rainy day fund, accelerates debt repayment schedules and commits to fully fund pension liabilities, she said.
The report lists Alaska, Nebraska, Wyoming, North Dakota and South Dakota as the top five states for financial health. The bottom five are Kentucky, Illinois, New Jersey, Massachusetts and Connecticut.
Tennert notes that most of the states that rank higher than Utah in the study, based on 2014 financial reports, have economies that rely heavily on the oil and gas industry. Oil was more than $100 a barrel then but is now below $50.
"The state budget outlook for these states is very different now than it was a couple of years ago, as opposed to Utah, where we continue to be in relatively good shape and ready to weather the next turn in the business cycle," she said.