The Best- and Worst-Performing State Economies in America

How well run are each of the 50 states?

Source:The Atlantic (http://www.theatlantic.com)
Authors:Douglas A. McIntyre, Michael B. Sauter, and Ashley C. Allen

At 24/7 Wall St., we recently completed one of the media industry's most comprehensive studies of state economic performance and financial management ever. We've looked at hundreds of data sets, ranging from debt-rating agency reports to violent crime rates, unemployment trends, and median income. Of those, we chose what we considered the 10 most important indicators of financial and overall government management. The standing of each state is supported by their ranking in the data sets we considered.

Comparing the economic performances of the states is challenging, particularly with the volume of the data and the many ways it can be interpreted. Comparison is even tougher, given that state governments operate with advantages and disadvantages that may be decades old -- including the presence of natural resources, decisions by large companies to locate or leave, and the extent to which populations are rural or urban.

But ultimately, well-run states have a great deal in common with well-run companies: Books are kept balanced. Investment is prudent. Debt is sustainable. Innovation is prized. Workers are properly recruited and well-trained. Executives are chosen on the basis of merit.

We identified surveys with complete data sets for each state. Using this data, our formula ranked each state, giving weight to metrics that are most important to prudent governance. In addition to traditional fiscal information, including GDP per capita, debt per capita, and credit rating, our analysis also showed the impact of state policies on its residents. (Our full methodology can be read here.)

The intention of our "State of the States" report is that it might serve to refocus public debate on state-level management and financial operations. Especially in times of economic uncertainty, there are few, if any, more important considerations for state governments than the extent to which they can improve their management and, ultimately, control their own destinies.

Methodology

24/7 Wall St. considered data from a number of sources, including Standard & Poor's, the Bureau of Labor Statistics, the National Conference of State Legislators, the Bureau of Economic Analysis, and the National Association of State Budget Officers. The Bureau of Labor Statistics provided unemployment data, and the Bureau of Economic Analysis provided GDP per capita. Credit rating agency Standard & Poor's provided credit ratings for all 50 states.

A significant amount of the data we used came from the U.S. Census Bureau's American Community Survey. Data from ACS included violent crime rate, unemployment rate, GDP per capita, percent below the poverty line, high school completion for those 25 and older, median household income, debt per capita, percent of the population without health insurance, and the change in occupied home values from 2006 to 2009. The ACS released its 2009 numbers on Tuesday, September 28th, 2010. These are the values we used in our survey. Once we reviewed the sources and compiled the final metrics, we ranked each state based on its performance in all the categories.