How well run are Americas 50 states? The answer depends a lot on where you live.
Every year, 24/7 Wall St. conducts an extensive survey of all fifty states in America. Based on a review of data on financial health, standard of living and government services by state we determine how well each state is managed. For the first time, North Dakota is the best run. California is the worst run for the second year in a row.
The successful management of a state is difficult to measure. Factors that affect its finances and population may be the result of decisions made years ago. A states difficulties can be caused by poor governance or by external factors, such as extreme weather.
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A state with abundant natural resources should have an easier time balancing its budget than one starved for resources. Regional problems or the national decline of certain industries can destroy local economies. The subprime mortgage crisis, for example, disproportionately affected states with strong construction and real estate markets. Such factors can be easily identified and noted as possible causes for a states poverty levels, unemployment, or strained coffers.
Despite this, it is the responsibility of each state to deal with the resources at its disposal. Each government must anticipate economic shifts and diversify its industries and attract new business. A state should be able to raise enough revenue to ensure the safety of its citizens and minimize hardship without spending more than it can prudently afford. Some states have historically done this much better than others.
To determine how well the states are run, 24/7 Wall St. reviewed hundreds of data sets from dozens of sources. We looked at each states debt, revenue, expenditure and deficit to determine how well it is managed fiscally. We reviewed taxes, exports, and GDP growth, including a breakdown by sector, to identify how each state is managing its resources. We looked at poverty, income, unemployment, high school graduation, violent crime and foreclosure rates to measure if residents are prospering.
The best-run states have certain characteristics in common, as do the worst run. The high-ranking states all have well-managed budgets. Each of the top ten has a perfect, or near-perfect, credit rating from Standard & Poors, Moodys, or both. Of the ten worst-ranked, only three received top scores from one agency, and none from both. California is currently the only state rated A- by S&P, the lowest score given to any state. These poor-ranked states have high debt relative to both income and expenditure.
There is a strong correlation between well-educated populations and generally well-managed states. Of the ten best-scoring states on our list, nine have among the highest percentages of adults with high school diplomas.
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Employment is also closely correlated to how well a state is managed. The unemployment rates of most of the poorly ranked states are among the highest in the country. Nine of the ten best-ranked states had an unemployment rate of less than 7% in 2011. This includes North Dakota, which had the lowest rate in the country in 2011, at just 3.6%. The average unemployment rate nationwide was 8.9% in 2011.
Best-Run States:
1. North Dakota
Thinkstock> Debt per capita: $3,282 (22nd lowest)
> Budget deficit: None
> Unemployment: 3.5% (the lowest)
> Median household income: $51,704 (20th highest)
> Pct. below poverty line: 12.2% (13th lowest)
For the first time, North Dakota ranks as the best run state in the country. In recent years, North Dakotas oil boom has transformed its economy. Last year, crude oil production rose 35%. As of August, 2012, it was the second-largest oil producer in the country. This was due to the use of hydraulic fracturing in the states Bakken shale formation. The oil and gas boom brought jobs to North Dakota, which had the nations lowest unemployment rate in 2011 at 3.5%, and economic growth. Between 2010 and 2011, North Dakotas GDP jumped 7.6%, by far the largest increase in the nation. This growth has also increased home values, which rose a nation-leading 29% between 2006 and 2011. North Dakota and Montana are the only two states that have not reported a budget shortfall since fiscal 2009.
2. Wyoming
Thinkstock> Debt per capita: $2,694 (18th lowest)
> Budget deficit: 10.3% (32nd largest)
> Unemployment: 6.0% (7th lowest)
> Median household income: $56,322 (13th highest)
> Pct. below poverty line: 11.3% (6th lowest)
Wyoming is not the best-run state in the nation this year. The drop is largely due to the states contracting economy. In 2011, GDP shrunk by 1.2%, more than any other state. As a whole, however, the state is a model of good management and a prospering population. The state is particularly efficient at managing its debt, owing the equivalent of just 20.4% of annual revenue in fiscal 2010. Wyoming also has a tax structure that, according to the Tax Foundation, is the nations most-favorable for businesses it does not have any corporate income taxes. The state has experienced an energy boom in recent years. The mining industry, which includes oil and gas extracting, accounted for 29.4% of the states GDP in 2011 alone, more than in any other state. As of last year, Wyomings poverty, home foreclosure, and unemployment rates were all among the lowest in the nation.
3. Nebraska
Thinkstock> Debt per capita: $1,279 (2nd lowest)
> Budget deficit: 9.7% (34th largest)
> Unemployment: 4.4% (2nd lowest)
> Median household income: $50,296 (22nd highest)
> Pct. below poverty line: 13.1% (tied-15th lowest)
Last year, Nebraska had the second-lowest unemployment rate in the nation at 4.4%. In Lincoln, the state capital, the unemployment rate was 4%, lower than all metropolitan areas in the country, except Bismarck and Fargo in North Dakota. Although far from the nations wealthiest state median income was slightly lower than the U.S. median of $50,502 Nebraskas economy is strong relative to the rest of the U.S. The state is one of the leading agricultural producers, with the sector accounting for 8.3% of the states GDP last year. The state also had the second-lowest debt per capita in the country in fiscal 2010, at $1,279, compared to an average of $3,614 for states nationwide.
4. Utah
Thinkstock> Debt per capita: $2,356 (15th lowest)
> Budget deficit: 14.7% (25th largest)
> Unemployment: 6.7% (tied-11th lowest)
> Median household income: $55,869 (14th highest)
> Pct. below poverty line: 13.5% (tied-17th lowest)
In fiscal 2011, Utah had a budget deficit of $700 million, equal to 14.7% of the states GDP. This debt-to-GDP ratio is worse than half the states in the U.S. Despite these problems, Utah has committed to reducing expenses in place of raising taxes or increasing debt. The state has also limited its borrowing. Its total debt was just under $6.5 billion in fiscal 2010, or $2,356 per capita less than most states and 40.4% of 2010 tax revenue. Both Moodys and S&P gave Utah their highest credit ratings because of the states strong fiscal management. Moodys commented that Utah has a tradition of conservative fiscal management; rebuilding of budgetary reserves after their use in the recession; [and] a closely managed debt portfolio.
5. Iowa
Thinkstock> Debt per capita: $1,690 (7th lowest)
> Budget deficit: 20.3% (18th largest)
> Unemployment: 5.9% (6th lowest)
> Median household income: $49,427 (24th highest)
> Pct. below poverty line: 12.8% (14th lowest)
Like many of the other well-run states, Iowa is one of the nations top agricultural centers the industry accounted for 6.6% of the states GDP in 2011. The farm economy has contributed significantly to growth, with farm earnings rising rapidly and land values skyrocketing. State GDP rose by 1.9% between 2010 and 2011 the 12th-highest increase in the country. Iowas unemployment rate fell from 6.3% in 2010 to just 5.9% in 2011, the nations sixth-lowest rate. The state has carried a low debt burden in recent years, averaging just $1,690 per capita in fiscal 2010, among the nations lowest. The state currently has the best possible credit ratings both from Moodys and S&P.
Worst-Run States:
50. California
Thinkstock> Debt per capita: $4,008 (18th highest)
> Budget deficit: 20.7% (17th largest)
> Unemployment: 11.7% (2nd highest)
> Median household income: $57,287 (10th highest)
> Pct. below poverty line: 16.6% (18th highest)
California is 24/7 Wall St.s Worst Run State for the second year in a row. Due to high levels of debt, the states S&P credit rating is the worst of all states, while its Moodys credit rating is the second-worst. Much of Californias fiscal woes involve the economic downturn. Home prices plunged by 33.6% between 2006 and 2011, worse than all states except for three. The states foreclosure rate and unemployment rate were the third- and second-highest in the country, respectively. But efforts to get finances on track are moving forward. State voters passed a ballot initiative to raise sales taxes as well as income taxes for people who make at least $250,000 a year. While median income is the 10th-highest in the country, the state also has one of the highest tax burdens on income. According to the Tax Foundation, the state also has the third-worst business tax climate in the country.
49. Rhode Island
Thinkstock> Debt per capita: $9,018 (3rd highest)
> Budget deficit: 13.4% (28th largest)
> Unemployment: 11.3% (3rd highest)
> Median household income: $53,636 (17th highest)
> Pct. below poverty line: 14.7% (24th lowest)
Rhode Islands finances were a mess in fiscal 2010. The state had $9.5 billion in unpaid debts, which came to 107.2% of that years revenues.At more than $9,000 per person, its one of the largest debt burdens in the country. The state also funded less than half of its pension obligations, worse than all states except for Illinois. In 2010, in a spectacular example of fiscal mismanagement, the state guaranteed a $75 million loan to a video game company, which has since defaulted. With one of the nations slowest growth rates and the third-highest unemployment rate in the U.S., at 11.3%, Rhode Islands economy performed poorly overall.
48. Illinois
Thinkstock> Debt per capita: $4,790 (11th highest)
> Budget deficit: 40.2% (2nd largest)
> Unemployment: 9.8% (tied-10th highest)
> Median household income: $53,234 (18th highest)
> Pct. below poverty line: 15.0% (25th highest)
Although many states have budget issues, Illinois faces among the biggest problems. In 2010, the states budget shortfall was more than 40% of its general fund, the second-highest of any state. Both S&P and Moodys gave Illinois credit ratings that were the second-worst of all states. In addition, the state only funded 45% of its pension liability in 2010, the lowest percentage of any state. Governor Patrick Quinn has made the now-$85 billion pension gap a top priority for the new legislative session beginning in January.
47. Arizona
Thinkstock> Debt per capita: $2,188 (12th lowest)
> Budget deficit: 39.0% (3rd largest)
> Unemployment: 9.5% (tied-13th highest)
> Median household income: $46,709 (21st lowest)
> Pct. below poverty line: 19.0% (tied-8th highest)
Between 2006 and 2011, the value of homes in Arizona tumbled by 35%, more than every state except for Nevada. The state also had the nations second-highest foreclosure rate in 2011, with one in every 24 homes in foreclosure. In the aftermath of the financial crisis, Arizona had some of the nations largest budget shortfalls. In fiscal 2010, the state had a shortfall of $5.1 billion, equal to 65% of its general fund. In fiscal 2011, Arizonas budget deficit was 39.0% of its general fund, the third-highest in the nation. In the recent state elections, residents voted on several measures intended to shore up the states finances. Voters rejected the continuation of a sales tax hike, while approving the restructuring of the states property tax assessment system.
46. New Jersey
Thinkstock> Debt per capita: $6,944 (5th highest)
> Budget deficit: 38.2% (4th largest)
> Unemployment: 9.3% (14th highest)
> Median household income: $67,458 (3rd highest)
> Pct. below poverty line: 10.4% (3rd lowest)
Between 2010 and 2011, New Jerseys GDP contracted by 0.5%, more than all but three other states. The states median household income and poverty rate were both third best in the nation. On the other hand, the states tax burden on its residents was second highest in the U.S. in 2010. Residents paid 12.4% of their income in state and local taxes, higher than any other state except New York. The state has many budget problems, as well. New Jerseys debt as a percentage of revenue was 91.6%, the fifth-highest of all states.
How did your state do? Click here for the full list of the best- and worst-run states.
