California ranks 3rd last in financial-strength test

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Bad as it is, the economic and fiscal mess facing California Gov. Jerry Brown isn’t the worst among the 50 states: At least by one measure, Arizona and Illinois have the Golden State beat for financial misery as the new year begins.

Not by much, though.

Analysts at investment bank BMO Capital Markets in Chicago have devised an index to gauge the relative financial strength of the states. The index combines measures of economic and employment health, bond quality ratings, home price movements, tax collections, and actual and projected budget deficits from 2009 through 2012.

All but four states now register negative financial strength indexes -- an indication of how extensive state budget troubles have become, even though the U.S. economy overall has grown for six straight quarters as measured by gross domestic product.

California clocks in with an index reading of -9.9%, third-worst of the 50 states. Tied for last place: Arizona and Illinois, both of which show index levels of -10.7%.

Nevada is fourth-worst, at -9.7%, followed by New Jersey (-7.5%), Connecticut (-5.6%), Oregon (-5.3%) and South Carolina (-5.0%).

To put those figures in perspective, the average index reading of the 50 states and the District of Columbia is -3.3%.

The four states with positive readings: North Dakota, at +3.7%; Alaska, +1.5%; West Virginia, +0.6%; and Indiana, +0.1%.

-- Tom Petruno