On a day when an editorial in the venerable Chicago Tribune newspaper is making national news for pleading with Illinois lawmakers to clean up the state's fiscal mess, it's a good time for Florida to count its blessings.
There but for the grace of God and a slew of successful conservative policies ...
The Sunshine State barely avoided a great big fiscal rathole of its own on Election Day by rejecting progressive leadership and the prospect of turning a sound red state blue. Maybe not Illinois blue, but a Gillum victory likely would have started the Sunshine State down Insolvency Road. The James Madison Institute report published in October told us that.
Right now, on the basis of its solvency in five separate categories, Florida ranks 4th among U.S. states for fiscal health, behind only Nebraska, South Dakota and Tennessee.
Illinois, on the other hand, ranks 50th -- dead last and apparently in real trouble.
Next month Democratic Gov.-elect J.B. Pritzker will take office alongside the Democratic-controlled Illinois General Assembly.
Tribune editors quote a recent report by Fitch Ratings: "Illinois has exhibited a 'lack of coherent fiscal policymaking over many years' and is guilty of 'irresolute fiscal decision-making'," they write.
Editors explain the facts in the Prairie State: "The costs of lawmakers’ recklessness are borne in many ways. Springfield raised the state income tax by 32 percent in 2017, and still Illinois can’t keep a balanced budget. The current fiscal year is about $1.2 billion out of whack. And despite issuing bonds to pay some unpaid bills, there’s still a backlog of about $7 billion in, yes, unpaid bills. The state is making payments to the pension system, although not as much as actuaries say is necessary, so the shortfall rises. The pension system, which includes government workers and many of the state’s teachers, should be 90 percent funded. Instead, it’s about 40 percent funded."
In another set of rankings released Oct. 29 -- these from George Mason University's Mercatus Center -- compare No. 4 Florida's rankings in five categories with No. 50 Illinois' rankings in the same categories:
- Cash solvency measures whether a state has enough cash to cover its short-term bills, which include accounts payable, vouchers, warrants, and short-term debt. (Florida ranks 4th; Illinois 49th)
- Budget solvency measures whether a state can cover its fiscal year spending using current revenues. Did it run a shortfall during the year? (Florida ranks 6th; Illinois 46th)
- Long-run solvency measures whether a state has a hedge against large long-term liabilities. Are enough assets available to cushion the state from potential shocks or long-term fiscal risks? (Florida ranks 17th, Illinois 49th)
- Service-level solvency measures how high taxes, revenues, and spending are when compared to state personal income. Do states have enough “fiscal slack”? If spending commitments demand more revenues, are states in a good position to increase taxes without harming the economy? Is spending high or low relative to the tax base? (Florida ranks 5th; Illinois 14th)
- Trust fund solvency measures how much debt a state has. How large are unfunded pension liabilities and OPEB liabilities compared to the state personal income? (Florida ranks 7th; Illinois 46th)
Says the Mercatus report, "Florida has between 4.80 and 5.81 times the cash needed to cover short-term obligations, well above the U.S. average. Revenues exceed expenses by 7 percent, with an improving net position of $277 per capita. In the long run, Florida has a net asset ratio of 0.12. Long-term liabilities are lower than the national average, at 31 percent of total assets, or $2,199 per capita. Total unfunded pension liabilities that are guaranteed to be paid are $253.01 billion, or 27 percent of state personal income. OPEB are $20.55 billion, or 2 percent of state personal income."
Even the Washington, D.C.-based Cato Institute, in an August report, called Florida the freest state in the nation. The Cato study ranked each U.S. state by “how its public policies promote freedom in the fiscal, regulatory, and personal freedom spheres.”
The Sunshine State earned seven top-10 rankings, including four No. 1's -- in the Overall, Fiscal, Economic and Cable categories -- in the 2018 edition of "Freedom in the 50 States," produced by the think tank.
"Floridians should be proud of their No. 1 ranking,” study co-author William P. Ruger wrote. “Florida’s leaders have largely avoided restrictive policies that have harmed economic growth in other states while making opportunity-enhancing reforms that have benefited current residents and the hundreds flocking to the state each day.”
The bottom line is, all states perched on a fiscal cliff, no matter whose ranking you go by, are deep blue and far left. Besides Illinois, the danger zones are Connecticut, New Jersey and Massachusetts. If it's limited government, personal responsibility and economic freedom you value, these four states are unlikely to tempt you.
Oh, yes -- and at the same time the Tribune's editorial about Illinois was hitting its mark, Florida Chief Financial Officer Jimmy Patronis was announcing more good news for Florida -- that Standard & Poor Global Ratings raised the fund quality rating on the Florida Treasury Investment Pool to AA- from A+. S&P cited the pool’s strong exposure -- the quality of investment, comparison with other funds with similar composition, and sound management by CFO Patronis’ Division of Treasury as the reasons why they made this change.
“Today’s news that S&P raised our Treasury Investment Pool’s credit rating to AA- is a testament to Florida’s fiscal responsibility and strong asset management," Patronis said. "Even more importantly, our elevated credit rating put us in a stronger position to manage your taxpayer dollars. Better returns on our investments can keep taxes low and you can keep more of your money."
The CFO said it will continue to be his policy to diversify investments smartly and responsibly, including partnering with Israel to invest $40 million in Israeli bonds and supporting Florida’s allies.
"The Treasury Investment Pool is valued at approximately $24 billion", Patronis said. "Money into the Florida’s treasury comes from state agencies by way of fees and other taxpayer dollars, and is used primarily to pay the state’s bills, including payments to vendors and running the state government."
Meanwhile, the Tribune ended its editorial less with a ring of hope than a ringing shot at the status quo. "We’ve heard (Gov.-elect Prizker) talk about raising revenue by shifting the state to a progressive tax rate that can extract more money from higher-income earners. That idea strikes us as no panacea. It’s easy to demand more money from taxpayers. It’s also easy to continue borrowing money. Both would weaken the state, and then weaken it further by driving employers elsewhere."
Which, fortunately, is what Florida Republicans have said for the last two and half decades. My thanks to the Tribune for the reminder.
Reach Nancy Smith at nsmith@sunshinestatenews or at 228-282-2423. Twitter: @NancyLBSmith
