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New Jersey's fiscal health ranked second-worst in the country in a new report released Tuesday.

(Tony Kurdzuk | The Star-Ledger)

TRENTON -- New Jersey is second worst in the nation in a survey of states' overall fiscal health released Tuesday.

The Garden State beat only Illinois in the study of how much debt it has and how much cash is on hand conducted by George Mason University's conservative think tank, The Mercatus Center.

With nine credit downgrades since 2010 and a $40 billion unfunded pension liability, New Jersey often lands near the bottom of these rankings. In The Mercatus Center's report, it's in the company of Illinois, Massachusetts, Connecticut and New York.

"The states that rank toward the bottom include states with ongoing structural deficit problems and difficulty achieving annual budget balance, in addition to long-term debt and pension pressures," the report said.

Oil rich states like North Dakota and Alaska lead the states in fiscal health.

"Most states are back to normal since the Great Recession, although there are troubling signs that many states are still ignoring the risks on their books, mainly in underfunded pensions and health care benefits," author Eileen Norcross said.

States were compared across metrics measuring if they have enough cash on hand to pay their bills, whether they have budget shortfalls and their ability to meet spikes in demand for state services.

New Jersey ranked dead-last in year-to-year budget solvency -- the state was beset by revenue shortfalls last spring -- and long-term outlook. It was 38th in cash solvency and 30th in terms of debt and unfunded health care and pension liabilities, based on 2013 financial reports.

New Jersey's pension system is historically one of the worst-funded in the country. Actuaries recommend the state pump $4 billion into the system this year, but it will contribute just $1.3 billion.

It is among about a dozen states that will have a tough time meeting its long-term obligations, the report said. While some states's liabilities, like Nebraska and Alaska, represent just a fraction of their assets, New Jersey is among four states whose liabilities are one-and-a-half to two times its assets.

Average liabilities per capita was $2,768, according to the report. New Jersey's was three times higher, or $8,662.

Of the five major categories, the state only cracked the top half in one: "service-level solvency," or how easily it could meet heightened demand for services. The study measured states' flexibility based on states' ratios of taxes, revenues and expenditures to total state personal income.

"New Jersey appears to have plenty of room to find revenues to address its ongoing budgetary shortfalls and growing pension burden. Yet institutional factors complicate the picture," it said. "New Jersey's income tax is highly progressive, with the state deriving nearly 50 percent of its revenues from the top 10 percent of income-tax filers. These are revenues highly vulnerable to market downturns."

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Samantha Marcus may be reached at smarcus@njadvancemedia.com . Follow her on Twitter @samanthamarcus. Find NJ.com Politics on Facebook.