Are you living in a Zombie State?

For 2022 the five scariest Zombies were Delaware (46), Massachusetts (47), Connecticut (48) Illinois (49), and New Jersey (50). 

Professor Edward Kane coined the term "Zombie Bank" for banks unable to pay their debts but using untruthful accounting to stay alive.  Zombie banks "gamble for resurrection" and take large risks.  Are state and local governments the new Zombies? Truth in Accounting's Zombie Index identifies states possibly gambling for resurrection. 

States with higher Zombie Index rankings deserve scrutiny of the risks in their investments for public pension plans. The Zombie Index Ranking is from 1-50, with one indicating the smallest Zombie, and 50 indicating the largest Zombie. 

This index is inspired by Kane's term "zombie banks," which refers to banks and thrifts that were effectively insolvent but allowed to remain open via untruthful accounting and regulatory forbearance. These banks were called "zombies" because they were really dead but allowed to walk among the living, while false accounting delayed loss recognition and regulatory intervention. Zombies had incentives, in Kane's words, to "gamble for resurrection." 

Similar incentives could be at work in state and local governments today, particularly those with sorely underfunded pension plans. Citizens and taxpayers may be threatened by risky investments in those plans.

Our Zombie Index identifies states that may be especially prone to this kind of behavior based on six equally weighted elements that relate to what Kane viewed as the factors in Zombie-ness. We rank the states on each of the metrics we developed for these factors. Then we compute an average for those six factors and rank the states on their averages. When states tie on their average ranking, we use the "Taxpayer Burden" change since 2009 to break the tie. For more details on the Index see here.