Mississippi’s financial condition
Given that Mississippi is the poorest state in America, a study that ranks the state’s financial condition 34th out of 50 isn’t all that bad.
The study, by the Mercatus Center at George Mason University in Virginia, rewards states with a little extra cash, properly funded employee pensions and low debt as a percentage of the population’s income. It used data from 2015 to compile its information.
It’s no surprise to anyone who follows state government that Mississippi ranks highly in cash solvency, which is a credit to the austerity of Republicans in Jackson. It also is no surprise that the state is 47th in debt and unfunded pensions — because it has too much of both.
To put numbers to it, Mississippi’s biggest problem is the size of its unfunded pension obligations: a whopping $16 billion.
That’s actually a little lower than the national average, but it’s a bigger issue because Mississippi is such a relatively small state, and therefore has fewer resources from which to draw.
Only 60 percent of its pension is funded. The main question here is whether taxpayers or state employees will contribute a greater share of money for the retirement fund.
Total state debt was $5.53 billion, which amounts to a relatively high five percent of state residents’ personal income of $106 billion. This will provide future ammunition for Lt. Gov. Tate Reeves, who has had some success in reducing the amount of money the state borrows each year.
It is interesting to compare Mississippi’s finances, and its 34th-place ranking, with those of neighboring states. Three are doing better: Tennessee is eighth, Alabama 12th and Arkansas 20th. Louisiana, which has gone on a borrowing binge, ranks 44th.
In some ways, it’s not a fair fight. Tennessee, after all, has Nashville and Memphis, which are far more economically powerful than any two cities in Mississippi. But Tennessee has used its money wisely: The state has only $2 billion in government debt, less than half of Mississippi’s; and only $500 million in unfunded pension obligations.
Poor Louisiana, meanwhile, carries a whopping $12 billion in government debt and $20 billion in unfunded pensions. Comparatively speaking, Mississippi is doing a far better job of handling its money.
It’s worth noting that a state’s small size is not a hindrance. Small states dominate the top 10, including North Dakota, South Dakota, Wyoming, Nebraska and Idaho.
It’s also telling that many states in the top half of the rankings are run by Republicans, while many of those near the bottom — Massachusetts, Illinois and New Jersey are 48th through 50th — lean toward Democrats.
Illinois, which has racked up $15 billion in bills it cannot pay, is a good example of what happens when a state is too generous. Eventually the money runs out.
On the flip side, future rankings should show the risks states take with their finances when they get overzealous about cutting taxes.