VA’s fiscal condition is merely mediocre


MIDDLING STATE: A study of the relative fiscal health of all 50 states ranks Virginia 25th.

By Kathryn Watson |, Virginia Bureau

ALEXANDRIA — Virginia lawmakers are famous for saying the commonwealth is in superb fiscal shape, at least, compared to the rest of the country.

Oftentimes they mention that Forbes named Virginia the best state to do business in 2013.

But a new study, released by the Mercatus Center at Virginia’s own George Mason University in Fairfax, begs to differ, ranking Virginia’s overall fiscal condition 25th. That’s somewhere in between New Jersey (50th) and Alaska (first).

“Fiscal simulations by the Government Accountability Office suggest that despite recent gains in tax revenues and pension assets, the long-term outlook for states’ fiscal condition is negative,” reads the summary of the report by author Sarah Arnett, adding that rising health-care costs and funding state and local pensions are hurting the outlook.

To come up with the overall fiscal condition index, Arnett ranked each state in four categories — cash solvency (a state’s ability to pay its bills in the near term), budget solvency (a state’s ability to generate enough revenue to cover expenditures over a fiscal year), long-run solvency (a state’s ability to cover all its expenditures, such as pension obligations), and service-level solvency (whether a state has enough resources to provide its residents with adequate services).

Virginia scored 13th in service-level solvency and 18th in budget solvency — not great, but certainly not the worst.

But its overall ranking took a hit in long-run fiscal solvency (28th) and in cash solvency (29th).

In a nutshell, Virginia is struggling to pay its bills in the short-term and its debt obligations in the long-term, according to the study’s findings.

The state’s underfunded pension system isn’t helping.

Another study by D.C.-based think tank State Budget Solutions shows Virginia has roughly $91 billion in debts — and almost $80 billion of that is in unfunded pension liabilities.

Still, if the bills filed so far are any indicator, it doesn’t appear as though lawmakers will be seriously tackling the pension problem in 2014.

Kathryn Watson is an investigative reporter for’s Virginia Bureau, and can be reached at

Mercatus’ state fiscal condition rankings (fiscal 2012):

Top 10:
1. Alaska
2. South Dakota
3. North Dakota
4. Nebraska
5. Wyoming
6. Florida
7. Ohio
8. Tennessee
9. Montana
10. Alabama

Bottom 10:
50. New Jersey
49. Connecticut
48. Illinois
46. California
45. New York
44. Maryland
43. Hawaii
42. Pennsylvania
41. West Virginia
40. Kentucky

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