Special Report

The Best and Worst Run States in America: A Survey of All 50

State Capitol, Bismarck, North Dakota
Source: Wikimedia Commons

1. North Dakota
> Debt per capita: $2,493 (18th lowest)
> 2015 Unemployment rate: 2.7% (the lowest)
> Credit rating: Aa1/AA+
> Poverty: 11.0% (9th lowest)

North Dakota tops our list of best-run states for the fifth year in a row. While the plunge in oil prices in 2014 was bad news for North Dakota oil companies, rich oil resources continue to stimulate the state’s economy. The unemployment rate remains lower than in any other state, and the median home value in North Dakota surged by 40.7% over the past five years, the largest increase of any state.

Like most of the nation’s best-run states, North Dakota has low debt levels. The state’s total debt was equal to just 18.9% of its 2014 revenue, the fourth lowest percentage of all states. This helps explain the state’s Aa1 rating from Moody’s and its AA+ rating from S&P. Despite its relatively high rating, North Dakota is the only relatively well-run state on our list with a negative outlook from Moody’s. The poor outlook is a reflection of a relatively large budget gap, as well as lack of confidence in future revenue streams. The state’s economy shrank last year by 2.1%, the largest GDP contraction of any state.

St. Paul, Minnesota, USA
Source: Thinkstock

2. Minnesota
> Debt per capita: $2,882 (19th lowest)
> 2015 Unemployment rate: 3.7% (tied-7th lowest)
> Credit rating: Aa1/AA+
> Poverty: 10.2% (tied-3rd lowest)

In addition to direct government policy, numerous factors outside of a government’s control can affect a state’s poverty level. Still, economic and social prosperity among a state’s population is a good sign the state is being run relatively well. Minnesota is one such state. The state’s poverty rate of 10.2% is tied for third lowest in the country, and the median household income of $63,488 annually is 12th highest of all states. Also, due in part to Gov. Mark Dayton’s decision to expand Medicaid in 2013, just 4.5% of Minnesotans do not have health insurance, the fourth lowest uninsured rate and less than half the national rate of 9.4%.

The financial well-being of the residents of well-run states also helps increase tax revenue for the state. Minnesota’s tax revenue in its fiscal 2014 totalled $4,213 per capita, higher than all but five other states.

Lincoln, Nebraska
Source: Thinkstock

3. Nebraska
> Debt per capita: $1,007 (2nd lowest)
> 2015 Unemployment rate: 3.0% (2nd lowest)
> Credit rating: No GO debt/AAA
> Poverty: 12.6% (19th lowest)

One way to gauge how well a government runs a state is by looking at the state’s finances. Without large revenue streams, a high debt-to-revenue ratio is a bad sign for a state’s ability to fund projects and programs and meet its debt obligations. Nebraska’s debt is equal to just 15.8% of annual revenue, the second lowest such percentage of all states.

Nebraska’s unemployment insurance system is not as friendly as other well-run states. The average weekly payout to claimants of $305 is below the national average. Partially as a result, the average percentage of income that is replaced by the system, at 37.9%, is also relatively low compared with other top states on this list. Despite the less than generous UI system, however, just 3.0% of the state’s labor force was unemployed over the course of 2015, the second lowest jobless rate of all states.

Cheyenne, Wyoming
Source: Thinkstock

4. Wyoming
> Debt per capita: $1,586 (7th lowest)
> 2015 Unemployment rate: 4.2% (tied-13th lowest)
> Credit rating: No GO debt/AAA
> Poverty: 11.1% (10th lowest)

With a large energy industry, Wyoming is heavily dependent on tax revenues from the sector. As a result, the state’s tax revenue is especially vulnerable to market fluctuations, and its revenue fell with the decline in oil prices. Still, with the largest rainy day fund in the nation, Wyoming is in a relatively strong financial position. Wyoming’s reserve coffers amount to 50% of total annual expenditures, the largest share of any state. While Wyoming is one of two states without a formal law dictating how to spend the fund, lawmakers have recently suggested the reserves be spent to cover the budget shortfalls resulting from lost oil revenues.

The Wyoming government spends $15,797 per student on education, roughly $4,800 more than the national average. Heavy education spending may be one reason for Wyoming’s high educational attainment. An estimated 92.2% of Wyoming adults have at least a high school diploma compared to 87.1% nationwide.

Salt Lake City at night, Utah
Source: Thinkstock

5. Utah
> Debt per capita: $2,446 (17th lowest)
> 2015 Unemployment rate: 3.5% (5th lowest)
> Credit rating: Aaa/AAA
> Poverty: 11.3% (12th lowest)

Utah is the only state in which more than one in three residents is younger than 20 years old. With the highest child-to-adult ratio in the country, Utah’s education system demands more resources than in many other states — and with fewer income earners comprising the tax base. However, while the state’s education budget accounts for a nation-leading 41.2% of total spending, this expenditure is equal to just $6,500 per student, the least of any state.

Utah also has a healthy economy and provides generous unemployment benefits. Just 3.5% of the state’s labor force was out of work in 2015, the fifth lowest unemployment rate of all states. For those who are out of a job, unemployment insurance covers 45.2% of wages on average, one of the highest replacement rates of any state.

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