California placed 44^th among U.S. states for fiscal health, which is two places higher than the year before. During FY 2012-13, California placed 46^th and had a -2.01 score on the Mercatus Center’s fiscal condition index, which is the sum of the cash, budget, long-run and service-level solvency indices. This year, the center added an additional trust fund solvency index to the formula, and ultimately scored California at -1.41 on the overall fiscal condition index.

In terms of cash solvency, California remains near the bottom of the group in 46^th place. According to the report, states have, on average, two times the amount of cash as short-term liabilities. But California is one of 14 states with a cash ratio of less than one – which means we have less cash on hand than short-term liabilities. In fact, Mercatus reports, “The state can only cover 59 percent of its short-term expenses with the most liquid forms of cash.” And when less liquid forms of cash were included in the mix, California had “1.29 times cash relative to short-term bills, nearly three times less than the national average.”

Long-run solvency also dealt a blow to California’s fiscal health index. Unfunded pension obligations, state debt and OPEB liabilities indicated that the state does not have enough assets to cover its long-term liabilities. California carries a staggering primary government debt of $123.46 billion; the market value of unfunded pension liabilities totaled $636.22 billion, and the total unfunded OPEB liability reached $65.97 billion. Those liabilities represented nearly 80 percent of the California’s assets, which is double the national average. That amounts to $4,320 per capita, and a net asset ratio of -0.43.

However, California’s budget solvency and service-level solvency saw higher rankings, at 23^rd and 27^th place, respectively. Budget solvency deals with fiscal year spending in relation to current revenues. During fiscal year 2013-14, California was “able to meet its fiscal year spending with revenues about equal to expenses,” with a slight surplus of $260 per capita. Service-level solvency determines whether a state is in a good position to increase taxes without harming the economy and whether spending is too high relative to its tax base. According to the report, “California’s total taxes made up 6 percent of state income, about average for the nation,” while revenues made up “13 percent of total personal income.”

Read the full report here.