Do fiscally responsible states have wealthier populations?

We often talk about government finances as separate from personal finances, but is there any correlation? Do states with better fiscal health have citizens with higher personal income?

According to the Bureau of Economic Analysis personal income is as “the income received by, or on behalf of, all persons from all sources: from participation as laborers in production, from owning a home or business, from the ownership of financial assets, and from government and business in the form of transfers.” And personal income per capita is calculated by taking the total number of personal income in the state and dividing it by the state’s population.

When we look at the five states that ranked the highest in the 2019 Financial State of the States (FSOS) report, or the Sunshine States, which are Alaska, North Dakota, Wyoming, Utah, and Idaho we find a mixed bag of results.

Alaska and Wyoming both have personal incomes per capita over $60,000; North Dakota’s is over $50,000; and Idaho’s and Utah’s are both under $50,000. Even though Idaho and Utah fall on the low end of the spectrum, these states saw some of the largest increases in personal income in 2019. Utah’s personal income increased by 6 percent and Idaho’s increased by 5.9 percent.

Now let's look at the five states that ranked the lowest in the FSOS report, or the Sinkhole States, which are Hawaii, Massachusetts, Connecticut, Illinois, and New York.

Connecticut has the highest personal income per capita of any state at $79,087. New York and New Jersey have the third and fourth highest personal incomes per capita respectively. New York’s is $71,440 and New Jersey’s is $70,979. On the other hand, Illinois’ and Hawaii’s personal incomes per capita is only slightly above the 50 state average at $58,935 and $57,450 respectively.

With the exception of Massachusetts, these Sinkhole States saw a lower increase in personal income than the 50 state average of 4.3 percent. Massachusetts, however, had a 4.4 percent increase in personal income in 2019.