Iowa’s State Debt Ranks 2nd-Best Nationally

For the past three years, House Republicans have worked hard to change the culture under the Golden Dome when it comes to state spending.  These efforts have produced balanced and sustainable budgets.  The results of this common-sense approach to state spending are starting to be noticed at the national level.

Last week, Barron’s published a review of state debt obligations which was done by the investment research firm Eaton Vance.  They compared debt and pension obligations of each state to their gross domestic product, and rated their performance.  Iowa was rated second highest, only trailing Nebraska.  The number two ranking is an improvement over last year’s third place finish.

Eaton Vance’s work shows that the state’s debt obligation is 0.7% of the state’s GDP.  Iowa’s unfunded pension obligation is 1.5% of state GDP.  In terms of state debt, Iowa ranks fourth – trailing Nebraska (0), Wyoming (0.1%), and North Dakota (0.4%).  On the pension side, only Nebraska has a lower rating – 0.7%.

Nebraska’s position at the top was explained by their governor, Dave Heineman, when he told Barron’s: “We believe in a fundamental financial principle that they’ve never heard of in Washington. We don’t spend money we don’t have. It keeps you out of trouble every day.”  This Midwest value can be seen with Nebraska, Iowa, South Dakota, Kansas, and North Dakota taking five of the top seven spots in the Eaton Vance rankings.

At the bottom of the scale is Connecticut, whose state debt equals 8.1% percent of GDP and unfunded pensions amounts to another 18.7%.  And to no one’s surprise, coming in at number 49 in the rankings is Illinois.  The Land of Lincoln has debt equaling 4.7% of their GDP.  Where Illinois stands out, in a bad way, is their unfunded pension liability.  Illinois’ pension systems are short an amount that equals a staggering 20.7 percent of state GDP.

In working to maintain a balanced and sustainable budget, House Republicans have held firm on upholding their budgeting principles of spending less than the state collects, not using one-time money to fund on-going programs, and not balancing the budget by intentionally underfunding programs.  This has allowed the state to go from a $900 million budget shortfall in early 2011 to a $895 million over collection at the end of FY 2013.