Alaska Ranks #1 in Fiscal Health; Or Does it?

Is Alaska #1 or maybe #50 in fiscal health? It all depends on what one looks at to determine the fiscal health. Accounting for long term liabilities such as pensions and retired government employee health care, Alaska ranks closer to #50 in fiscal health.

The Mercatus Center at George Mason University released its annual version of “Ranking the States by Fiscal Condition” last week.  Guess what?  It showed Alaska as ranking #1 in fiscal health beating all the other states.  Well, we do know that Alaska is #1 in many things including, natural beauty, natural resources, and lots of wild animals.  But then again, we Alaskans know that the current budget crisis where our bloated government devours all our resource income really ranks #1 in the nation.


The authors of the fiscal condition ranking duly note that one must look much deeper to see that fiscal health appearance is very deceptive.  One must look at the long term liabilities such as pensions and health insurance for government retirees to determine the real fiscal health of a state.  Here is a quote from Veronique deRugy, in a Reason magazine article (emphasis added):

“Take Alaska. Once again, the state takes first place, thanks in large part to its large reserve of cash, which is the product of its oil revenue. However, this overreliance on oil could become a problem in an age of decreased oil prices. Interestingly, almost all of the top five states are overly reliant on unpredictable revenue sources.

In addition, Alaska ranks second to last in service-level solvency. The numerous restrictions put on the use of oil revenue—the state is hoarding cash but can’t use it as it pleases or needs—and other poor management of the state’s assets, including an already high tax burden, means Alaska has very little fiscal slack in case of an emergency.

The state also ranks second to last in trust fund solvency, meaning its retirement system is underfunded. Its pension funds (on a market value basis) are only 29 percent funded, meaning that the rest is not paid for. Its total pension debt is 70 percent of personal income in Alaska. That’s hardly financially sound, even though the threat may be less visible for now because the bill won’t be due until later and the state claims that 58 percent of its pension liability is funded”

To read the entire Mercatus study authored by Eileen Norcross go here.