Atlas State of the States’ Financials - 2015


Chicago IL, September 30, 2016
Muni Atlas Research, Inc. ("Atlas") today released the second financial statements review on all 50 US states, Washington DC and Puerto Rico for fiscal year 2015.
Most US states have their fiscal year-end dates in June. However, five states (see below) use different year-end dates. For comparison purposes, we have selected the financial statements ending within the same year.
March: New York
August: Texas
September: Alabama, Michigan and Washington, DC
Financial statement data are collected from state governments’ official Comprehensive Annual Financial Report (CAFR). Demographic data are collected through the US Census Bureau as of December, 2015. As of the time of this research report, Puerto Rico has not reported its latest CAFR, Atlas uses its 2014 financial statements data instead. The State of Alabama also has not released its official financial statements yet. However, it did release an unaudited financial report. Atlas uses the data from the unaudited financial report for Alabama.
Atlas looked at 3 key statistics: (1) financial leverage, (2) expense/ revenue ratio, and (3) Long term state debt per household. Similar to the report Atlas released last year, the US Commonwealth of Puerto Rico stands out as being by far the worst compared with any other state in the US.
Starting from 2015, the governments include pension liabilities in the financial statements, which significantly increased the long-term liabilities inthe balance sheets. While Puerto Rico’s number is still in the "high alert" level, we saw more states move into the "watch list" compared to the numbers last year.
On the financial leverage side, Puerto Rico is at the top with a leverage number of412.05%, compared to last year at 389.89%. This means for every $1 in assets the Commonwealth government hasover $4 in liabilities. It is followed by New Jersey at 344.05% and Illinois at 302.35%. Six other states also have more liabilities than assets: Massachusetts (261.02%), Connecticut (224.70%), Kentucky (144.21%), California (117.16%), Rhode Island (107.84%), and Maryland (107.30%).
In terms of government total expenses versus total revenues, Alaska has the highest Expense/Revenue ratio at 149.38%, compared to 64.43% in 2014. This dramatic change is primarily due to the big decrease of its interest and investment income, as well as tax income related to the oil industry given the steep decrease of crude oil price in 2015 compared to 2014. Puerto Rico falls to second place this year, having increased its revenue collection, and also slightly reduced its expenses during the last fiscal year. Now the expense/revenue ratio reduced to 114.04% from 130.75%ofthe previous fiscal year. Five other states also spent more than they made: New Jersey (110.01%), Louisiana (106.18%), Illinois (104.70%), Massachusetts (104.32%), and Kansas (101.62%)
Atlas also looked at the long-term debt picture of all state governments expressed in terms of the amount per household. Given the recalculation of pension liabilities, the state governments have more long-term debt on their balance sheets this year compared to the previous year. Puerto Rico still sits on top with per-household long-term debt at $49,456. The State of New Jersey is not too far behind at $47,265 per household, followed by Connecticut ($42,204) and Washington DC ($41,639). There are 6 other states that have more than $20,000 in long-term debt per household: Hawaii ($37,435), Alaska ($33,666), Illinois ($32,616), Massachusetts ($26,561), Kentucky ($24,046), and Washington State ($22,894).
Since the median household income for each state is different, Atlas further looks at the state long-term debt per household compared to their median household income. Given Puerto Rico’s median household income of $19,624, it would take the median household 30.2 months, without spending a penny elsewhere, to help the Commonwealth government pay back its long-term debt of $49,456. New Jersey sits in second place at 7.9 months, followed by Connecticut and Washington D.C. both at 7.2 months, Illinois (6.8 months), Kentucky (6.7 months), and Hawaii (6.6 months).
Overall, Puerto Rico is still in financial crisis. Given the increased consideration of huge pension liabilities, Atlas also pays special attention to the states with high financial leverage coupled with high expense/revenue ratios like New Jersey, Illinois, and Massachusetts. Atlas will keep closely monitoring the financial status of those states in the coming years.
About Atlas: As part of our complete Municipal data offering, Atlas collects financial statements for thousands of local governments, with unique insights and over 10 years of history. This report only includes a few metrics. To request the full report, or for other Muni data needs, please contact us.
Atlas: Muni Investment Research Specialist