Evaluating State Fiscal Health in the U.S: A New Model and Its Application

In efforts to better understand the financial condition of state and local government and to be better prepared for fiscal exigencies during crises, practitioners and academics alike strive to find a better way to assess governmental financial condition. Several models have been developed to evaluate state and local government over the past several decades, with significant limitations. We propose a more comprehensive framework to evaluate the fiscal health of state government based on these models. Further, we utilize the data from the annual comprehensive financial reports of state governments in the U.S. for 2003 to 2018 to demonstrate the applicability and usefulness of the modified model. The results are useful for state administrators and financial managers in their efforts to assess financial condition and fiscal administration and add to the literature on state fiscal health.