NEW MERCATUS STUDY ON FISCAL HEALTH RANKS DELAWARE 38TH OF 50

​by James DeChene

The Mercatus Center at George Mason University released their Ranking the States by Fiscal Condition 2016 report, which compares the 50 states and Puerto Rico, and Delaware was ranked 38th (last year Delaware was ranked 30th). The study ranks a state’s fiscal health based on short- and long-term debt and other key fiscal obligations, such as unfunded pensions and healthcare benefits. Delaware’s fiscal solvency was based on information in five separate categories: cash solvency, budget solvency, long-run solvency, service-level solvency and trust fund solvency.

Unfortunately, Delaware was considered a “big mover.” According to the study:
To be considered a “big mover,” a state must have shifted position by more than five spots between the 2015 and 2016 editions (which use the latest available data, from fiscal years 2013 and 2014, respectively). A change in ranking of five or fewer places is not considered a significant change in the underlying metrics. For the most part, states’ overall fiscal performance remained relatively constant. Only Delaware and Iowa dropped significantly in the overall ranking of fiscal condition.

On a short-term basis, Delaware has between 1.90 and 3.23 times the cash needed to cover short-term liabilities. Revenues cover 98 percent of expenses, producing an operating deficit of $195 per capita. On a long-run basis, Delaware has a negative net asset ratio of −0.03, and long-term liabilities account for 51 percent of total assets. Debt totals $3.02 billion. On a guaranteed-to-be-paid basis, unfunded pension liabilities are $8.03 billion, and other postemployment benefits (OPEB) add a further $5.66 billion in unfunded obligations.
​
This study dovetails with what the State Chamber, and others, have been warning of for the last few years. While our short-term obligations are currently covered, Delaware’s long-term fiscal health is seriously compromised. Study after study shows that without significant structural changes to the budget, how revenue is collected, and how that money is spent, Delaware faces a crisis situation in the near term.