> Debt per capita: $3,677 (20th highest)
> Credit rating (S&P/Moody’s): AA-/Aa3
> Unemployment rate: 5.1% (24th highest)
> Median household income: $53,234 (22nd highest)
> Poverty rate: 13.6% (20th lowest)
Pennsylvania is currently in the middle of a budget stalemate, as Democratic Governor Tom Wolf is in political gridlock with the state’s Republican legislature to reach an agreement on an annual budget. State officials missed the budget deadline, and over the four months of the proceedings, the budgetless state spent more than $27 billion — a considerable proportion of annual funds typically available to the state. Such spending in the state is unsustainable. Pennsylvania was one of seven states last fiscal year reporting no rainy day funds whatsoever. For Moody’s, these budget difficulties display poor fiscal management. The rating agency downgraded Pennsylvania’s credit rating this year to Aa3, one of the lowest of any state.
> Debt per capita: $1,331 (5th lowest)
> Credit rating (S&P/Moody’s): AA/Aa1
> Unemployment rate: 5.1% (24th highest)
> Median household income: $41,262 (3rd lowest)
> Poverty rate: 18.9% (6th highest)
By many measures, Arkansas is one of the most poorly run states in the country. Roughly 19% of state residents live below the poverty line, one of the highest poverty rates in the country. The typical household in Arkansas earns about $41,262 annually, much less than the $53,657 the typical American household earns. A weak tax base may have contributed to the state’s less-than-optimal credit rating from Moody’s and S&P.
Arkansas is one of only seven states that does not maintain a rainy day fund. However short- sighted that may be, the state spends more in other areas. Educational spending accounts for 42.8% of the state’s annual budget, a significantly larger share than the 35.6% average across the country. Additionally, Arkansas has minimal debt. The state’s total debt is equal to $1,331 per resident, much lower than the average per capita debt among states of $3,567.
> Debt per capita: $3,998 (17th highest)
> Credit rating (S&P/Moody’s): AA/Aa2
> Unemployment rate: 6.2% (5th highest)
> Median household income: $44,555 (7th lowest)
> Poverty rate: 19.8% (3rd highest)
According to Moody’s, which applies a negative outlook to the state’s Aa2 rating, things are likely to get worse in Louisiana before they get better. Moody’s cited a dwindled rainy day fund and “muted job growth” as some justifications for its unfavorable forecast. In the last four years, the state’s unemployment rate has declined by just 1.3 percentage points, far worse the 3.8 percentage point national improvement. Today, 6.2% of Louisiana’s workforce is out of work, the fifth highest unemployment rate nationwide.
44. New Jersey
> Debt per capita: $7,190 (5th highest)
> Credit rating (S&P/Moody’s): A/A2
> Unemployment rate: 5.4% (16th highest)
> Median household income: $71,919 (2nd highest)
> Poverty rate: 11.1% (4th lowest)
Only one state, Illinois, has a worse credit rating from Moody’s and S&P than New Jersey. Despite collecting the seventh highest total tax revenue in the country, only a handful of states have more debt than New Jersey. New Jersey is also one of only seven states that does not have a rainy day fund. Struggling to attract new residents, the state added less than 7,000 people due to migration between 2010 and 2014, which accounts for just a fraction of a percent of the current population.
Despite clear signs of poor fiscal management, New Jersey residents are relatively prosperous. Roughly one in 10 New Jersey households earns at least $200,000 annually, the largest such share in the country. Additionally, only 11.1% of New Jersey residents live below the poverty line, the fourth lowest poverty rate of any state. With high incomes and low poverty, the median household income in the state of $71,919 is the highest in the country after Maryland.
> Debt per capita: $3,395 (25th highest)
> Credit rating (S&P/Moody’s): A+/Aa2
> Unemployment rate: 4.9% (24th lowest)
> Median household income: $42,958 (5th lowest)
> Poverty rate: 19.1% (5th highest)
Kentucky has one of the most underfunded pension systems in the nation. With its current level of pension funding, the state has the ability to meet just 44.0% of its obligations. In an attempt to make full payments to the state’s pension recipients, the Kentucky legislature passed a law in 2013 that does not require the Kentucky Employment Retirement Systems to make expensive cost-of-living adjustments if funding is not available. Last year, the state government finalized a $20.3 billion budget that will regulate the 2015-2016 fiscal period. Kentucky’s spending obligations currently outpace its revenues, but those revenues, according to the National Association of State Budget Officers, are expected to increase slightly. Kentucky’s increased spending obligations may require the state to dip into its insufficient rainy day fund, which amounts to just 0.8% of its annual expenditures. The state is projected to face a $500 million budget shortfall — the severity of which will largely depend on tax reform and gaming revenue in the coming years.