Florida #1 in Fiscal Health

Editor’s note: Contributing columnist, Steve Nicklas, expresses his views and insight on various topics in Marketplace column.

___STEVE’S MARKETPLACE___

The Sunshine State is beaming right now. As well it should be.

Florida has a $3 billion budget surplus for the second straight year, meaning that it is paying its bills and leaving money for savings, emergencies, etc. And this financial strength is reflected in a new, prestigious recognition.

State Fiscal Rankings 2017

Florida placed No. 1 in fiscal health of all 50 states in the latest rankings by the Mercatus Center at George Mason University in Arlington, Va.

The Mercatus Center is a non-profit think tank that has produced a “Ranking the States by Fiscal Condition” report for four years now.

“It is really a result of making tough choices every year,” says State Sen. Aaron Bean about Florida’s budget discipline. “We have to shuffle our priorities.”

Bean was speaking to a Rotary Club in Jacksonville last week when he mentioned that the “rankings are in.” Most of the club members thought Bean was talking about college football — and how the Florida State Seminoles or the Florida Gators were ranked this year.

To their surprise, Bean proceeded to tell them about Florida’s standing in the Mercatus fiscal rankings. The rankings are determined by each state’s short- and long-term debt and other key fiscal obligations, such as unfunded pensions and healthcare benefits. 

Some states just make poor spending decisions. Bean cites an instance in 2011 when the federal government offered $2 billion to Florida to build a bullet train. Florida rejected the offer, knowing it would be responsible for any amount over the $2 billion of federal funds. Meanwhile, California accepted the money.

Now, the bullet train is costing California some $9 billion to complete. Florida also turned down Medicaid funds offered by the federal government during the Obamacare rollout. Florida rightfully did not accept either offer because of the financial strings attached — like tentacles that would grip the state for years.

There are interesting findings and parallels in the fiscal report. Joining Florida among the top five states are North Dakota, South Dakota, Utah, and Wyoming.  (Neighboring Georgia is ranked a respectable 22nd.) Common characteristics of these states are high levels of cash, fully funded pensions, and strong operating positions.

The bottom five states are obviously weak in these categories. New Jersey placed No. 50 in the rankings, followed by Illinois, Massachusetts, Kentucky and Maryland. These states typically battle enormous debt and pension obligations, along with declining populations (of residents, businesses, etc.). These factors can impact residents there through higher tax rates, inferior infrastructure and an inability to attract new businesses. 

Ironically, or not so ironically, each of these states are located in the northeastern part of the country. In fact, the 10 strongest states are heavily Republican, while all but one of the 10 weakest states are mostly Democratic. These deductions are based upon factors like how states voted in the past four presidential elections. 

The conservative fiscal approach of lower taxes and limited government is the hallmark of the highest-ranked states. These are usually synonymous with Republicans. Big-spending liberalism is the common mindset of the lower-rated ones, emblematic of Democrats.

As part of its state constitution, Florida must balance its budget each year. You know, where the income covers the expenses. This helps maintain a fiscal vitality.

Not every body works this way. “I only wish the federal government would have the same discipline,” Bean says. Maybe they can use Florida as a shining example.
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Steve Nicklas is a financial advisor and a chartered retirement planning counselor with a major U.S. firm who lives on Amelia Island. His financial columns also appear in several newspapers in North Florida and in South Georgia. He recently published a book, “All About Money,” of his favorite columns from the last 20 years. The book is available at local stores and on Amazon. He can be reached at 904-753-0236 or at [email protected].