What is the state’s fiscal condition? And why?

Iowa, according to the ranking of state fiscal conditions by the Mercatus Center at George Mason University, is in pretty good financial condition. Their analysis ranks all 50 states on four major solvency criteria: cash, budget, long-run financial condition and service-level requirements.

We rank 18th overall, behind states such as Alaska, South and North Dakota, Nebraska and Wyoming and well ahead of New Jersey, Connecticut, Illinois, Massachusetts and California the coastal (mostly) problem children. Interestingly, all five top states have a Republican Governor and Legislatures. Four of the five bottom states have Democrat chief executives, and all have Democrat controlled Legislatures. Further, all the high-ranked states have limited or part-time, Legislative sessions, while the bottom states have year-round, full-time Legislatures.

On cash solvency, Iowa ranks 17, based upon the ratio of money available compared to the current bills. This is how much tax money is on hand to pay salaries, equipment and services owed by state government.

In the overall budget solvency, Iowa ranks 16. This is made up of both total revenues divided by total expenses, and the surplus per capita. The surplus is figured by dividing the change in net assets by population.

The long-run financial condition (13th) ranking is made up of the net asset, long-term liability and long-term liability per capita ratios. A key determinant of this ranking is the long-term state government employee pension liability. Here, Iowa ranks better than most, but state pensions are not fully funded, which increases taxpayer risk.

The final category of service-level requirements is most nebulous in that the service demands of citizens vary greatly. What do we want our government to do? Everything? Are workers satisfied with a lower level of services in return for a lower level of taxation? The taxes, revenue and expenses per capita make up this ranking, and Iowa was scored at a relatively low 34. This indicates that we are taxed fairly highly for the value of the services we receive. Service-level data is basically a ranking of government efficiency.

According to the report, “States with high budget solvency but lower service-level solvency may have difficulty meeting the cost for increased services in the event of an increase in public demand for services” – at least without either income or sales tax increases. Further, “Higher taxes and revenue per capita suggest a higher burden on state residentsthe government is already providing an expensive level of servicesand may not be allocating resources in the most efficient or productive manner.”

The low service-level score reflects the demand for high spending in both education (55 percent of state budget), and high medical care, the next largest category. Government health-care costs are high both because we have more elderly and low-income citizens and by federal actions such as Obamacare.

Neither the number of children being taught nor their test scores are going up but the tax money spent on education is consistently and steadily increasing indicating our education taxes are not being spent effectively and efficiently. It is unfortunate that no education reform was passed during this year’s Legislative session. Instead liberal members of both the House and Senate spent their time agitating for even higher spending; not looking for more effective use of the money we are already spending.

If the Democrats in the Legislature are sincerely interested in improving our children’s education, versus simply rewarding their wealthy special interest group contributors, they would support expanded or liberal open enrollment and Education Savings Accounts (ESAs).

Until they do, Iowa will continue to score only “OK” in national rankings just like our children.

The views expressed in this column are those of the author and not necessarily those of the Public Interest Institute. They are brought to you in the interest of a better informed citizenry.

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Deborah D. Thornton is a research analyst for the Public Interest Institute in Mount Pleasant. The views expressed in this column are those of the author and not necessarily those of the Public Interest Institute or the Times-Republican.

Iowa, according to the ranking of state fiscal conditions by the Mercatus Center at George Mason University, is in pretty good financial condition. Their analysis ranks all 50 states on four major solvency criteria: cash, budget, long-run financial condition and service-level requirements.

We rank 18th overall, behind states such as Alaska, South and North Dakota, Nebraska and Wyoming and well ahead of New Jersey, Connecticut, Illinois, Massachusetts and California the coastal (mostly) problem children. Interestingly, all five top states have a Republican Governor and Legislatures. Four of the five bottom states have Democrat chief executives, and all have Democrat controlled Legislatures. Further, all the high-ranked states have limited or part-time, Legislative sessions, while the bottom states have year-round, full-time Legislatures.

On cash solvency, Iowa ranks 17, based upon the ratio of money available compared to the current bills. This is how much tax money is on hand to pay salaries, equipment and services owed by state government.

In the overall budget solvency, Iowa ranks 16. This is made up of both total revenues divided by total expenses, and the surplus per capita. The surplus is figured by dividing the change in net assets by population.

The long-run financial condition (13th) ranking is made up of the net asset, long-term liability and long-term liability per capita ratios. A key determinant of this ranking is the long-term state government employee pension liability. Here, Iowa ranks better than most, but state pensions are not fully funded, which increases taxpayer risk.

The final category of service-level requirements is most nebulous in that the service demands of citizens vary greatly. What do we want our government to do? Everything? Are workers satisfied with a lower level of services in return for a lower level of taxation? The taxes, revenue and expenses per capita make up this ranking, and Iowa was scored at a relatively low 34. This indicates that we are taxed fairly highly for the value of the services we receive. Service-level data is basically a ranking of government efficiency.

According to the report, “States with high budget solvency but lower service-level solvency may have difficulty meeting the cost for increased services in the event of an increase in public demand for services” – at least without either income or sales tax increases. Further, “Higher taxes and revenue per capita suggest a higher burden on state residentsthe government is already providing an expensive level of servicesand may not be allocating resources in the most efficient or productive manner.”

The low service-level score reflects the demand for high spending in both education (55 percent of state budget), and high medical care, the next largest category. Government health-care costs are high both because we have more elderly and low-income citizens and by federal actions such as Obamacare.

Neither the number of children being taught nor their test scores are going up but the tax money spent on education is consistently and steadily increasing indicating our education taxes are not being spent effectively and efficiently. It is unfortunate that no education reform was passed during this year’s Legislative session. Instead liberal members of both the House and Senate spent their time agitating for even higher spending; not looking for more effective use of the money we are already spending.

If the Democrats in the Legislature are sincerely interested in improving our children’s education, versus simply rewarding their wealthy special interest group contributors, they would support expanded or liberal open enrollment and Education Savings Accounts (ESAs).

Until they do, Iowa will continue to score only “OK” in national rankings just like our children.

The views expressed in this column are those of the author and not necessarily those of the Public Interest Institute. They are brought to you in the interest of a better informed citizenry.

—–

Deborah D. Thornton is a research analyst for the Public Interest Institute in Mount Pleasant. The views expressed in this column are those of the author and not necessarily those of the Public Interest Institute or the Times-Republican.