Friday, January 28, 2011

States most likely to go bankrupt: Surprise! Not Michigan!

Posted By on Fri, Jan 28, 2011 at 12:22 PM

The Daily Beast website posted an extremely depressing article earlier this week ranking each of the 50 states on their likelihood of declaring bankruptcy in the near future, the composition of which must’ve been only slightly more fun than ranking one’s family members on their likelihood of an expeditious death.

The list was based on a simple algorithm involving each state’s current debt, their currently unfunded benefit obligations (such as for health care or pension funds) and their predicted budget shortfall (which in layman’s terms is the difference between the state’s predicted spending rate and their revenue rate when the former is greater than the latter, which is naturally the case for most states) for 2012. Sigh. Where’s the Tea Party when you really need them?

Although this formula revealed that, yes, many states are in pretty deep shit, Michigan is in (relatively) good shape, coming in around the middle of the pack at No. 27, with a debt of a mere $29.6 billion and $51.5 billion in unfunded benefits. Could be worse, right?

The remainder of the rankings yielded plenty of other surprising results. Turns out New England is the worst off, with all its states placing in the top 20. Rhode Island, Connecticut and Massachusetts, with its astounding 20.43% debt-to-GDP ratio, making up the top 3. Meanwhile, the South and flyover country for the most part look to be in the best shape. Well, relatively. You’ll be happy to know, though, that according the article, nearly every state is planning to solve its debt woes by cutting superfluous entities like education spending, instead of doing something outrageous like making rich people pay slightly higher taxes. Thank god! —Jeremy Winograd, MT editorial intern

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