Financial State of U.S. States: Analysis and Insights

Understanding State Finances

A recent analysis by Truth in Accounting highlights fiscal disparities among U.S. states. Notably, 24 states lack the finances to pay all their bills. However, North Dakota stands out with a solid financial report.

North Dakota’s Fiscal Strength

North Dakota ranks first in Truth in Accounting’s 2026 Financial State of the States report, closing fiscal year 2025 with a surplus of $21 billion. This surplus leads to a ‘Taxpayer Surplus’ of $72,300, the highest in the nation. While this figure doesn’t translate directly to cash for taxpayers, it indicates a strong fiscal health per taxpayer.

Economic Implications

The gap between states with surplus and those with deficits has significant implications. States with stronger finances are better positioned to handle economic downturns and maintain public services. In contrast, states with large debts may face challenging decisions regarding taxes and spending when income drops.

“North Dakota’s oil boom has significantly strengthened its economy, generating billions in tax revenue annually.”

The state’s financial health benefits from its Legacy Fund, an investment fund fueled by oil tax revenue. Although there has been a decrease in oil, gas, and coal tax revenues due to lower energy prices, strong investment returns and federal grants have offset these declines.

States with Surplus and Deficit

Following North Dakota in financial rankings are Alaska, Wyoming, Utah, and Tennessee, with taxpayer surpluses ranging from $11,400 to $72,300. These states’ fiscal positions contrast with the 24 states unable to cover their obligations, such as New Jersey, which faces a $162.3 billion shortfall.

New Jersey’s ‘Taxpayer Burden’ is the highest at $45,800, with Connecticut, Illinois, Massachusetts, and California also facing substantial deficits. These states experience taxpayer burdens between $16,000 and $45,800.

Retirement Obligations’ Impact

Retirement obligations significantly influence state finances. In fiscal 2025, states faced $775 billion in unfunded pension and $490 billion in retiree health care liabilities. Although most states improved financially in 2025, largely due to high investment returns, Truth in Accounting advises caution as these gains may reverse if the market weakens.