Saturday, September 14, 2013

Per capita debt + unfunded pension liabilities by state

Randall Parker points to a CNBC article focused on unfunded pension liabilities at the state level that is packed with quite a bit of data on the financial condition of the fifty. I've been after something like this for several years.

There are multiple ways to view the numbers, but probably the most broadly informative involves adding together current state debt and unfunded pension liabilities going forward and then looking at these on a per capita basis. That is, determine the dollars each resident of a state is putatively on the hook for at present to pay what the state currently owes and will expect to additionally owe beyond its projected funds on hand. Of course, debt can be defaulted on and promises reneged--realistically, that, in tandem with some combination of currency devaluation, is my best guess for how this unsustainable situation eventually resolves itself, with varying levels of disruption at varying times in the future.

The following table shows per capita debt-plus-future-obligations ("debt" going forward), with the financially healthiest states at the top of the list and the least solvent states at the bottom:

StatePerCap$
1. South Dakota513
2. Tennessee847
3. Idaho969
4. Nebraska1,046
5. North Carolina1,138
6. Texas1,514
7. Wyoming1,982
8. Wisconsin1,982
9. Iowa2,296
10. Florida2,320
11. Missouri2,426
12. Georgia2,436
13. Vermont2,688
14. Arkansas2,695
15. Indiana2,707
16. North Dakota2,726
17. Maine2,756
18. Utah2,785
19. Arizona2,939
20. Washington2,961
21. Oklahoma3,237
22. Delaware3,265
23. South Carolina3,487
24. Michigan3,535
25. New York3,548
26. Minnesota3,606
27. Alabama3,746
28. New Hampshire3,762
29. Virginia4,035
30. Montana4,042
31. West Virginia4,223
32. Pennsylvania4,284
33. Kansas4,402
34. Oregon4,611
35. Nevada4,801
36. Maryland4,864
37. Colorado4,996
38. Louisiana5,205
39. California5,650
40. Mississippi5,882
41. Rhode Island5,901
42. New Mexico6,554
43. Ohio7,025
44. Kentucky7,322
45. Massachusetts7,455
46. New Jersey8,480
47. Illinois9,056
48. Hawaii9,878
49. Connecticut10,776
50. Alaska12,363

A visualization of the data with figures is available here, and is reproduced without interaction below:


No blatant trends jump out. Sparsely populated, mostly white flyover states in close proximity of Canada tend to be in the best shape, with the major exception of Alaska. Thank goodness for that petroleum dividend--suspend payouts for a decade or so and the problem is solved!

Illinois, the nation's most demographically representative state, similarly serves as one of the states that comes closest to serving as a microcosm for the nation as a whole, though even it comes up well short. While Illinois' residents are looking at a little north of $9,000 in debt peonage per, these state-level obligations pale in comparison to the debts and empty promises of the federal government, for which debt alone is currently running over $50,000 per person.

The article opens by attributing Detroit's municipal bankruptcy to "underfunded retirement promises to public sector workers". Tautologically so, but no doubt haters have made attributions of their own that are hatefully racist and racially hateful. The correlation between a state's Ice People (non-Hispanic white + Asian) population percentage and its debt is an inverse .21. It runs in the direction haters expect it to run in, though it's a tepid relationship.

How about something to Sean Hannity's taste? The correlation between debt and Obama's share of the 2012 presidential vote is a more robust .39. Blue states really do tend to be less fiscally responsible than red states even though blue states generally have more human capital to work with.

Speaking of human capital, the inverse correlation between debt and estimated state IQ is a statistically insignificant .06. The relationship between median age and debt is more feeble still, at .03. It might be nice to think that the states that have the most time to formulate viable solutions before the bills start coming due en masse are the ones who need that time the most, but alas it isn't so.

In addition to having, on average, modestly less intelligent populations than blue states, red states also tend to be fatter. In light (heh) of the above, then, it comes as little surprise that debt and obesity inversely correlate at .23. In this case, it looks like it's possible to have your cake and eat it, too--those public service health campaigns in Connecticut aren't doing the nutmeg state's bottom line any good!

Parenthetically, as a supporter of full Puerto Rican independence, I can now point to the fact that the island's per capita debt, at $12,487, is higher than that of any state in the union. While Puerto Ricans may not be as affluent as Americans, they're even better at spending money they don't have than we are. Really, what do they need us for?

6 comments:

Anonymous said...

Can we have this chart 50 years ago when the "Rust Belt" was the mightiest industrial power on earth?

Can we have this when Detroit was well...American?

The Blue States are richer than the Red States because they crushed their economies with "economics".

The Northern States of Italy are far more well..everything..because during "reunification" Milan crushed the Kingdom of Naples and looted all it's gold.

If you destroy by the Morgenthau plan plus welfare an ENEMY, his children will probably take their human capital to you.

This oh Blue States is all your capital, human and otherwise.

Jokah Macpherson said...

All that debt is taking its toll on poor Alaska. It looks like the state is breaking in two.

Dan said...

Insightful.

It should be pointed out that National Debt is 52,000 per person, making state debts a relative trifle -- averaging in the neighborhood of 4K, only 7.6% of Federal debt.

This makes a very strong case for localism as a way to avoid ruining the world.

Although another way of looking at this is that states are dumping all of their obligations onto the Federal government. They are quite responsible with their own money, but if the money is not their own, they couldn't care less.

http://globaleconomicanalysis.blogspot.com/2013/09/in-response-to-just-how-distorted-is-u.html

South Dakota has an enormous indigent Indian population, which sports some of the worst stats in America. I wonder who is on the hook for all of them?

Noah172 said...

Most of the nine states which do not tax labor income (seven tax no personal income at all, two others only tax dividends and interest) fall below the average for debt. Alaska is the weird outlier here, as it is in so much else, and probably should be ignored in this discussion.

Almost all states have balanced-budget requirements, so that combined with ruling out the main source of government revenue (income tax) seems to inhibit, though not prevent totally, debt accumulation and irresponsible promises (although no income tax without a balanced-budget requirement is a recipe for explosive debt).

Audacious Epigone said...

Jokah,

It's not just the physical weight of a population that can cause geological catastrophe--a heavy debt load apparently can do the same!

Dan,

Probably all of us. Lucky for South Dakota.

Audacious Epigone said...

Re: Noah's comment, the seven without income taxes and their ranking in terms of financial health:

Alaska #50
Florida #10
Nevada #35
South Dakota #1
Texas #6
Washington #20
Wyoming #7

Dividends and interest only:

New Hampshire #28
Tennessee #2

Indeed, looks pretty good with the noted exception of Alaska.