Pennsylvania's Fiscal Health is Ranked Near the Bottom

State and Local Tax

By Timothy Adams

As many are suffering from cold and flu symptoms at this time of year, a recent report from the Mercatus Center at George Mason University indicates that Pennsylvania’s fiscal health is also far from good.

In the Mercatus Center report, the Commonwealth’s overall fiscal health was ranked as the 42nd worst among the 50 states.  This fiscal health check-up focused on a state’s ability to meet its financial obligations.

Sarah Arnett, a public policy researcher at the Mercatus Center, measured the respective state’s solvency based on four criteria:

  • Cash Solvency – Reflects the state’s liquidity position and the cash that can be accessed to pay its bills in the short term;
  • Budget Solvency – Defined as the state’s ability to cover its costs in the current year without creating a deficit;
  • Long-run Solvency – Measured by the state’s ability to cover all costs, including long-term expenditures such as pension obligations, with incoming revenue; and
  • Service Level Solvency – Determined as the state’s ability to provide residents with services such as health and welfare services.

Among the four above criteria, Pennsylvania’s best ranking was 26th for its ability to provide services to its residents.  The Commonwealth had its worst ranking, 47 out of the 50 states, relative to its cash solvency position.

No matter your perspective on how a particular state’s fiscal health may be measured, it is clear that Pennsylvania and many of its neighboring states are still facing challenging economic times as a result of the recent U.S. recession, questionable budget practices, tax revenues that continue to lag behind expenditures and underfunded pension and health care obligations.

It took more than a few years to create this unenviable fiscal position in many states and it will take more than a few years to return to better fiscal health.

For more information, review the Mercatus Center’s State Fiscal Condition analysis.

Questions about Pennsylvania's fiscal health? Contact Schneider Downs' State and Local Tax professionals.

© 2014 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at contactSD@schneiderdowns.com.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2019 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.