Florida shines fiscally

The years since the pandemic recession have been good for state debt and liabilities nationwide, and in particular for Florida. 

Reason Foundation has created a unique data set by collecting numbers from state- and local-audited financial reports. We recently compared all 50 states’ debt and liabilities for 2020 to 2022, the most recent year for which full data is available. 

The accompanying map graphic gives you a sense of how all states look, color coded by the growth in the ratio of state total liabilities to per-capita liabilities, which better shows growth or reduction in state debt driven by state fiscal policies rather than just by changes in population. 

Source: Reason Foundation

You can immediately see that Florida looks pretty good relative to most other states. But before we dive into that, there are a few larger takeaways. 

First, almost all states saw revenues and asset values grow during the 2020-2022 period. That helped all but one state — North Dakota — to reduce their debt ratio (the proportion of total liabilities to total assets). 

Florida, during this period, reduced its liabilities substantially, with the ratio of growth in total liabilities to per capita liabilities falling more than 15%. 

Total liabilities fell from nearly $73 billion in 2020 to less than $62 billion in 2022. Per capita liabilities shrank from $3,383 to $2,871. That is excellent, especially compared to other states. 

Connecticut has the highest per capita liabilities at $29,607, more than 10 times that in Florida.  

But at the same time, Tennessee has per capita liabilities of less than $1,500, about half that in Florida.  

So, there is still room for improvement in Florida. What we need is more of what we have seen in the last few years. Gov. Ron DeSantis has aggressively pursued shrinking the state’s debts in recent years, including in most of his budgets hundreds of millions in accelerated debt reduction. That saves many tens of millions of dollars each year in interest payments.  

Each budget that includes paying down debt early and avoiding adding to the debt reduces the state’s liabilities. 

Source: Reason Foundation

One of the largest and most politically volatile sources of state liabilities is employee benefits.  

Florida reduced its government worker pension liabilities from $8.8 billion in 2020 to $3.5 billion in 2022 and also reduced other worker benefit liabilities from $91 billion to $7.3 billion. 

Those reductions are thanks to a series of pension reforms passed early in DeSantis’ term in office and to resisting adding new debt and making full appropriate contributions to pension plans. 

One caveat to this rosy picture, unfortunately, is local government debt in Florida. While the state has managed debt well, local governments have not. 

According to Florida Tax Watch, Florida ranks third best in the nation on per capita debt, but local governments rank 19th from the bottom. That is not sustainable, and local governments in Florida should learn something from DeSantis’ fiscal management.