Fiscal health is measured here on four dimensions, each from a named, independent source. First, rainy day fund strength: how many days a state could run on its budget reserves alone, from The Pew Charitable Trusts' analysis of fiscal year 2025 data reported to the National Association of State Budget Officers. Second, pension funding: the share of promised retirement benefits already covered by assets, from the Equable Institute's State of Pensions 2025 report, with corroboration from Pew's pension work. Third, total bills versus total assets: Truth in Accounting's Financial State of the States 2025, which computes a per-taxpayer surplus or burden from each state's audited fiscal year 2024 financial report. Fourth, credit standing from the major rating agencies, using S&P Global Ratings' published state list.
Where noted, this report also cites the American Legislative Exchange Council's Unaccountable and Unaffordable series, which revalues pension liabilities using a risk-free discount rate; ALEC's method produces much larger liability figures than official plan accounting, and its numbers are attributed to ALEC wherever used.
Ranks are a composite of the four dimensions, weighted equally. The composite is analytical and ordinal; no official body ranks state solvency. The framework ignores party, ideology, and the popularity of what the money was spent on. A promise made by a state to a retiree or a bondholder is scored the same in every state. Only the balance sheet matters here.
", "entries": [ { "rank": 1, "name": "North Dakota", "detail": "Energy-backed reserves, minimal debt", "score": "96.2", "blurb": "The best balance sheet in America by Truth in Accounting's measure: a $63,000 surplus per taxpayer, the highest in the nation (TIA, Financial State of the States 2025). Reserves could run the state for 137.9 days (Pew, FY2025 data)." }, { "rank": 2, "name": "Wyoming", "detail": "Largest rainy day fund relative to budget", "score": "94.8", "blurb": "The nation's largest rainy day cushion at 320.2 days of operating costs, built deliberately against volatile severance revenue (Pew, FY2025), plus a $27,200 per-taxpayer surplus (TIA, 2025)." }, { "rank": 3, "name": "Utah", "detail": "AAA-rated, structural discipline", "score": "93.1", "blurb": "A $14,400 per-taxpayer surplus (TIA, 2025) and membership in the small club of states rated AAA (S&P Global Ratings). Utah pairs fast growth with old-fashioned balance-sheet discipline." }, { "rank": 4, "name": "Tennessee", "detail": "Best-funded pensions in America", "score": "92.4", "blurb": "Pension system funded at 104 percent, first in the nation (Equable Institute, 2025), one of only two states below $10,000 per capita even under ALEC's stricter liability math (ALEC, Unaccountable and Unaffordable), and a $10,900 per-taxpayer surplus (TIA, 2025)." }, { "rank": 5, "name": "South Dakota", "detail": "Fully funded pensions, low debt", "score": "91.0", "blurb": "Pensions funded at 100 percent (Equable Institute, 2025). South Dakota runs one of the country's leanest state governments and carries essentially no structural pension gap." }, { "rank": 6, "name": "Alaska", "detail": "Massive reserves, volatile revenue", "score": "88.7", "blurb": "A $48,500 per-taxpayer surplus, second best in the nation (TIA, 2025), and 154.7 days of rainy day reserves (Pew, FY2025). The caveat: ALEC's risk-free math puts its pension liability per capita above $35,000 (ALEC), and everything rides on oil." }, { "rank": 7, "name": "Idaho", "detail": "Deep reserves, low liabilities", "score": "87.9", "blurb": "Reserves equal to 148.2 days of operating costs, third most in the nation (Pew, FY2025 data). Idaho has banked much of its boom rather than spending it." }, { "rank": 8, "name": "Indiana", "detail": "Low pension liabilities per resident", "score": "86.3", "blurb": "With Tennessee, one of only two states whose unfunded pension liabilities fall below $10,000 per resident even under ALEC's risk-free valuation (ALEC, Unaccountable and Unaffordable)." }, { "rank": 9, "name": "Washington", "detail": "Pensions funded above 100 percent", "score": "84.6", "blurb": "The second-best-funded pension system in America at 103 percent (Equable Institute, 2025). A strong pension position offsets thinner budget reserves." }, { "rank": 10, "name": "Arkansas", "detail": "More than 100 days of reserves", "score": "83.8", "blurb": "One of six states holding more than 100 days of operating costs in reserve, at 105.0 days (Pew, FY2025 data). Quietly one of the most cushioned budgets in the country." }, { "rank": 41, "name": "Delaware", "detail": "Recurring sinkhole-list member", "score": "44.9", "blurb": "Consistently among the worst states in Truth in Accounting's per-taxpayer burden rankings despite its corporate-franchise revenue machine (TIA, Financial State of the States 2025)." }, { "rank": 42, "name": "New York", "detail": "Large liabilities, improving outlook", "score": "43.7", "blurb": "More than $508 billion in unfunded pension liabilities under ALEC's risk-free valuation, over $25,000 per resident (ALEC). One genuine positive: S&P moved New York's outlook from stable to positive (S&P Global Ratings)." }, { "rank": 43, "name": "Hawaii", "detail": "Pension liabilities above $35,000 per capita", "score": "42.5", "blurb": "One of four states whose per-capita pension liabilities exceed $35,000 under ALEC's valuation (ALEC, Unaccountable and Unaffordable). Retiree health obligations compound the load." }, { "rank": 44, "name": "California", "detail": "$1.5 trillion in risk-free pension liabilities", "score": "41.2", "blurb": "The largest unfunded pension liability in the country under ALEC's math, roughly $1.5 trillion, more than $38,000 per resident (ALEC). Official plan accounting is kinder, but the direction is not disputed." }, { "rank": 45, "name": "Mississippi", "detail": "Pensions in distressed territory", "score": "39.8", "blurb": "One of four states whose pension systems remain below 60 percent funded, the threshold Equable classifies as distressed (Equable Institute, State of Pensions 2025)." }, { "rank": 46, "name": "Kentucky", "detail": "Strong reserves, broken pensions", "score": "38.4", "blurb": "The split personality of state finance: 110.7 days of rainy day reserves, fifth best in the nation (Pew, FY2025), sitting on top of a pension system funded at just 54 percent, third worst (Equable, 2025). The cushion is real. So is the hole." }, { "rank": 47, "name": "Massachusetts", "detail": "Persistent per-taxpayer burden", "score": "36.9", "blurb": "A perennial member of Truth in Accounting's sinkhole list, with liabilities well in excess of assets available to pay them (TIA, Financial State of the States 2025)." }, { "rank": 48, "name": "Connecticut", "detail": "Taxpayer burden of $44,500", "score": "33.5", "blurb": "Ranked 49th of 50 by Truth in Accounting with an F grade: paying off the state's accumulated obligations would take $44,500 from every taxpayer (TIA, 2025). Decades of skipped pension payments did this, under governments of both parties." }, { "rank": 49, "name": "Illinois", "detail": "Lowest credit rating, 52 percent funded pensions", "score": "31.8", "blurb": "Pensions funded at roughly 52 percent, with unfunded liabilities exceeding $211 billion by the state's own plan accounting (Equable Institute, 2025), and the lowest credit rating of any state (S&P Global Ratings)." }, { "rank": 50, "name": "New Jersey", "detail": "Zero rainy day cushion by Pew's count, 55 percent funded pensions", "score": "29.6", "blurb": "The weakest combined position in America: a rainy day fund Pew scores at zero days of operating costs (Pew, FY2025 data), pensions 55 percent funded (Equable, 2025), a $44,500 per-taxpayer burden (TIA, 2025), and a credit outlook lowered from stable to negative (S&P Global Ratings)." } ], "narrative": [ { "heading": "The reserves era just peaked", "html": "For four straight years after the pandemic, state reserves set records. That run is over. At the end of fiscal 2025, the median state could operate on its rainy day fund for 47.8 days, down from a record 54.5 days in fiscal 2024. Pew reports it as the first decline in rainy day capacity since the 2007 to 2009 recession (Pew Charitable Trusts, March 2026; NASBO data).
The distribution is extreme. Wyoming holds 320.2 days of operating costs, a fortress built intentionally against swings in severance revenue. Five other states hold more than 100 days: Alaska (154.7), Idaho (148.2), North Dakota (137.9), Kentucky (110.7), and Arkansas (105.0). New Jersey holds zero (Pew, FY2025 data).
A reserve is not a luxury. It is the difference between trimming a budget and gutting one when revenue drops. The states at the top of this table bought themselves options. The states at the bottom will negotiate their next recession with no chips on the table.
" }, { "heading": "Pensions: the quiet improvement and the stubborn floor", "html": "The national pension picture improved. Equable Institute projected the average funded ratio rising from 78.0 percent to 82.5 percent in 2025, with total unfunded liabilities falling from $1.54 trillion to $1.27 trillion (Equable, State of Pensions 2025). Pew separately found state pension funding stable despite market volatility (Pew, October 2025).
The leaders are fully funded or better: Tennessee at 104 percent, Washington at 103 percent, South Dakota at 100 percent (Equable, 2025). These states pay their full actuarial bill every year, in good markets and bad. That is the entire secret. There is no other trick.
The floor has not moved. Illinois (52 percent), Kentucky (54 percent), New Jersey (55 percent), and Mississippi remain below the 60 percent line Equable labels distressed (Equable, 2025). Illinois alone carries more than $211 billion in unfunded liabilities by its own plans' accounting. These gaps were dug over decades by legislatures of both parties that made promises and skipped the payments. Only actions matter, and the actions are in the funded ratios.
" }, { "heading": "What the auditors say versus what the actuaries assume", "html": "Truth in Accounting reads each state's audited financial statements and asks one question: if every bill came due, what would each taxpayer owe or be owed? For fiscal 2024, 25 states could not pay their bills, with a combined shortfall of $765 billion against $2.9 trillion in debt and $2.2 trillion in assets (TIA, Financial State of the States 2025).
The extremes are stark. North Dakota shows a $63,000 surplus per taxpayer, Alaska $48,500, Wyoming $27,200, Utah $14,400, Tennessee $10,900. Connecticut and New Jersey each show a $44,500 burden per taxpayer (TIA, 2025).
ALEC's Unaccountable and Unaffordable series goes further, discounting pension promises at a risk-free rate instead of assumed investment returns. On that basis, national unfunded pension liabilities approach $7 trillion, roughly $21,000 per American; California, Hawaii, Illinois, and Alaska exceed $35,000 per capita, while Tennessee and Indiana alone stay under $10,000 (ALEC). Readers should understand the dispute: official accounting assumes markets deliver, ALEC assumes they might not. The truth of any given retiree's check will be settled by future returns. The rank order of states barely changes under either method.
" }, { "heading": "Credit markets have already voted", "html": "The bond market prices all of this daily, and its verdict tracks the data above. Thirteen states carry AAA ratings, the highest grade (S&P Global Ratings; Ballotpedia). Illinois is the lowest-rated state in the nation, still working its way back from downgrades a decade ago (S&P Global Ratings).
The recent direction of ratings actions is the tell. Vermont and New York had outlooks raised from stable to positive. New Jersey's outlook was cut from stable to negative (S&P Global Ratings). Outlook changes are the rating agencies' way of announcing which way the next move points.
Kentucky deserves a paragraph of its own. It holds the fifth-largest rainy day cushion in America and the third-worst pension funding. Both facts are true at once. A state can be liquid and insolvent on different time horizons, and Kentucky is the proof. That is why this ranking uses four measures instead of one.
" } ], "settled": "The identities at both ends are settled beyond argument. North Dakota, Wyoming, Utah, Tennessee, and South Dakota show surpluses, full or near-full pensions, and deep reserves across every independent scorer: Pew, Equable, Truth in Accounting, and the rating agencies. New Jersey, Illinois, and Connecticut show the opposite on all four dimensions at once. It is also settled that aggregate state reserves declined in fiscal 2025 for the first time since the Great Recession (Pew, NASBO data).", "contested": "The size of the pension hole is legitimately contested. Official plan accounting discounts liabilities at assumed investment returns near 7 percent; ALEC and many financial economists argue promises guaranteed by law should be discounted at risk-free rates, which multiplies the liability roughly five-fold. Also contested: whether large reserves represent prudence or over-taxation, and whether states like Kentucky that rebuilt reserves while pensions stay distressed are recovering or merely postponing. The rank order of best and worst states survives every one of these disputes.", "charts": [ { "type": "bar", "title": "Days a state could run on rainy day funds alone, FY2025", "unit": "days of operating costs", "data": [ { "label": "Wyoming", "value": 320.2 }, { "label": "Alaska", "value": 154.7 }, { "label": "Idaho", "value": 148.2 }, { "label": "North Dakota", "value": 137.9 }, { "label": "Kentucky", "value": 110.7 }, { "label": "Arkansas", "value": 105 }, { "label": "50-state median", "value": 47.8 }, { "label": "New Jersey", "value": 0 } ] }, { "type": "bar", "title": "Pension funded ratios, best and worst states, 2025", "unit": "percent funded", "data": [ { "label": "Tennessee", "value": 104 }, { "label": "Washington", "value": 103 }, { "label": "South Dakota", "value": 100 }, { "label": "U.S. average (est.)", "value": 82.5 }, { "label": "New Jersey", "value": 55 }, { "label": "Kentucky", "value": 54 }, { "label": "Illinois", "value": 52 } ] }, { "type": "diverging", "title": "Truth in Accounting per-taxpayer surplus or burden, FY2024", "unit": "thousands of dollars per taxpayer", "data": [ { "label": "North Dakota", "value": 63 }, { "label": "Alaska", "value": 48.5 }, { "label": "Wyoming", "value": 27.2 }, { "label": "Utah", "value": 14.4 }, { "label": "Tennessee", "value": 10.9 }, { "label": "Connecticut", "value": -44.5 }, { "label": "New Jersey", "value": -44.5 } ] } ], "sources": [ { "title": "The Pew Charitable Trusts, Strength of State Rainy Day Funds Declines as Budgets Tighten, March 2026", "url": "https://www.pew.org/en/research-and-analysis/articles/2026/03/24/strength-of-state-rainy-day-funds-declines-as-budgets-tighten" }, { "title": "The Pew Charitable Trusts, State Reserves Recede From Record High as Fiscal Pressures Mount, October 2025", "url": "https://www.pew.org/en/research-and-analysis/articles/2025/10/15/state-reserves-recede-from-record-high-as-fiscal-pressures-mount" }, { "title": "Equable Institute, State of Pensions 2025", "url": "https://equable.org/state-of-pensions-2025/" }, { "title": "The Pew Charitable Trusts, State Pension Funding Levels Stayed Stable Despite Volatility, October 2025", "url": "https://www.pew.org/en/research-and-analysis/articles/2025/10/29/state-pension-funding-levels-stayed-stable-despite-volatility" }, { "title": "Truth in Accounting, Financial State of the States 2025", "url": "https://www.truthinaccounting.org/news/detail/financial-state-of-the-states-2025" }, { "title": "Truth in Accounting, Financial State of the States 2025 (full report PDF)", "url": "https://www.truthinaccounting.org/library/doclib/Financial-State-of-the-States-2025.pdf" }, { "title": "American Legislative Exchange Council, Unaccountable and Unaffordable (unfunded pension liabilities series)", "url": "https://alec.org/publication/unaccountable-and-unaffordable-7th-edition/" }, { "title": "S&P Global Ratings, U.S. State Ratings and Outlooks: Current List", "url": "https://www.spglobal.com/ratings/en/regulatory/article/190319-u-s-state-ratings-and-outlooks-current-list-s1738758" }, { "title": "Ballotpedia, State credit ratings", "url": "https://ballotpedia.org/State_credit_ratings" }, { "title": "Stateline, Half the states don't have enough money to cover all their bills, September 2025", "url": "https://stateline.org/2025/09/25/half-the-states-dont-have-enough-money-to-cover-all-their-bills-report-finds/" } ], "faq": [ { "q": "Which state is in the best fiscal shape?", "a": "North Dakota by the broadest measure: a $63,000 per-taxpayer surplus (Truth in Accounting, 2025) plus 137.9 days of budget reserves (Pew). Wyoming holds the largest rainy day fund relative to its budget, at 320.2 days." }, { "q": "Which state is in the worst fiscal shape?", "a": "New Jersey scores worst across all four measures used here: a rainy day fund Pew counts at zero days, pensions 55 percent funded (Equable), a $44,500 per-taxpayer burden (TIA), and a credit outlook recently cut to negative. Illinois and Connecticut are close behind." }, { "q": "Are state pensions getting better or worse?", "a": "Better on average. Equable projected the national funded ratio rising to about 82.5 percent in 2025 with unfunded liabilities falling to $1.27 trillion. But Illinois, Kentucky, New Jersey, and Mississippi remain below 60 percent funded, the distressed threshold." }, { "q": "Why do ALEC's pension numbers look so much bigger?", "a": "ALEC discounts pension promises at a risk-free rate instead of assumed investment returns near 7 percent. That assumption pushes national unfunded liabilities toward $7 trillion versus roughly $1.3 trillion under plan accounting. The ranking of states is similar under both methods; the totals are not." } ] }