Assessing a State's Financial Condition

Prior to 2000, the financial reporting model for state or local governments (SLG) did not include financial statements for the total government unit. The general-purpose financial statements were based on types of funds and not the overall government. When the Governmental Accounting Standards Board issued Statement No. 34, the lack of entity-wide financial statements was eliminated. The purpose of this study was first, to identify commonly used business financial analytical tools that can be used in an SLG analysis, and to demonstrate the use of these tools to assess the financial condition of the respective states in the US. The study provided the results of analyzing certain elements of financial condition for the 50 US states. Ratio analysis and available industry standards have proven useful in the private sector and, the authors believe they can be useful in the state and local government sector.