The Easy and Not So Easy Calls on States and a Look at GDP

Categories: Commentary |

June 16, 2014

This week I am pleased to share these pages with Mike Craft, the newest addition to the DIVER by Lumesis team. Mike, examining the DIVER Geo Score, provides excellent insight and perspective with regards to how one can use the Current and Trend Geo Scores to identify opportunity and risk. Following Mike’s analysis, I conclude with a quick look at recently released State GDP data and continued concerns around the ‘recovery.’

A ‘Crafty’ Way to Look at the Geo Score

The following section of this week’s commentary was provided by Mike Craft, Managing Director, Credit for Lumesis.

Earlier this month, the proprietary Geo Score was released for all States, counties and 350 cities across the country. The Geo Score is a ranking of the relative economic health of the scored States, counties and cities. In addition to the point in time Geo Score, a Trend Geo Score is available and it scores the 12-month relative changes in economic health. Both the point in time Geo Score and the trend Geo Score rank on a zero to ten (zero being the worst and ten the best).

The below map is the current Geo Score for the month of May.


The Geo Score can provide a meaningful compliment to financial metrics for predicting the future fiscal health of States, counties and cities (after all, economic activity is a major driver of fiscal well-being). This week, we offer a unique perspective on the Geo Score highlighting the power of combining the Current and Trend scores to identify States that are “winning” or “losing” (DIVER Analytics users can explore doing the same for counties and cities as well). The chart below categorizes the States into four quadrants:

1) Above average current Geo Score and trending better: notables ND, UT, TX
2) Below average current Geo Score and trending worse: MS, KY, AL, NM
3) Below average current Geo Score and trending better: NV, SC, MI, AZ
4) Above average current Geo Score and trending worse: VA, MD, NJ

The table below plots the Geo Scores for all States and highlights several in each quadrant.


As you consider the above, we think the lower left and upper right are the easy ones and the upper left and lower right quadrants are where the risk or opportunity may lie. In other words, we think the last two categories reveal the States to watch most closely.

Interestingly, two of the States in the lower right quadrant were in the news this week regarding lagging tax revenues. A Bloomberg report on Thursday highlighted New Jersey’s revenue shortfall vs. projections in four out of the last five years. A Reuters story covered Virginia’s May 21% drop in revenues year over year.

In May, Maryland’s Comptroller issued a warning that his State was heading for a budget shortfall due to lower than expected revenues. He was quoted in the Baltimore Business Journal: “We are going to announce some figures that are going to be stunning.”

While a portion of these shortfalls is likely due to taxpayers’ accelerating income to ’12 to minimize Federal tax bills, these states’ poor Geo Score Trend scores point to lagging economic growth relative to other states. For more detail on the impact of taxpayer timing decisions on State budgets see the report released last week by the Rockefeller Institute: “April Surprises More ‘Surprising’ Than Expected.”

State GDP Growth – Not Pretty

A couple of months back, I expressed concern around the uneven nature of the US recovery and pointed out that GDP growth for 2013 had been about 1.8% (half the pace of the previous three expansions). As I pointed out last week, the revised growth number for 1Q 2014 came in at (.1%) – yes, negative .1%. The hope, after downward revisions, has been for growth of 2% – some calling this the “new normal.”

The map below, GDP Growth for 2013, presents a telling and disconcerting picture with 23 States having growth of less than 2% (red and orange).


Below, the bottom and top GDP growth States are highlighted. I encourage our readers to pay close attention to GDP growth as a primary indicator of economic growth and tax receipts.


This week, Gregg and Mark will be in Boston and New York and Pete will be in NY. The two Mikes (Vossler and Craft) will be in Connecticut.

Have a great week.
Gregg L. Bienstock Esq.
CEO & Co-Founder, Lumesis, Inc.


Data Released Last Week:

  • Stabilization Fund, State, 2015
  • Medicaid Enrollment Change, State, 2014
  • Stabilization Fund as % of Expenditures, Stabilization Fund as % of Expend. Change, State, 2015
  • Foreclosures, State, County, May 2014
  • Weekly Initial and Continued Jobless Claims, State, 05/31/2014
  • Gen. Fund Revenue, Expenditure and Expenditure Change (Estimated), State, 2015
  • GDP, GDP Growth, GDP Per Capita, GDP Per Capita as % of US, GDP Rank, State, 2013