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Low Risk Locations for Long Term Dental Practice
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For access to our demographic information, please go to www.DoctorDemographics.com.
Low Risk Locations for Long Term Dental Practice
Hello. This is Scott McDonald and welcome to the perfect place to put a practice podcast.
Recent headlines are a little chilling. Maine and New Jersey are in a budget impasse. Granted, this can all be resolved quickly so don’t assume that this situation is permanent. Illinois, Connecticut and others seem to be in a permanent death-spiral. And California isn’t doing much better. So, you might ask, can a dental practice thrive in these states that seem always to be in debt and struggling to raise money through every higher taxes? The obvious answer is, “Of Course!” But the risks associated with these places will increasingly be felt by dental practices, large and small unless practice owners understand the cause of the problems. There are many but I will limit myself to just the big ones and then I will go on to discuss states that are better managed that you should consider if you need to open somewhere else.
One of the big problems many of these places are facing is the unfunded mandates they have with government workers. This includes remarkably generous dental benefits to retirees and state workers. On one level, this makes them desirable because compensation seems higher than in other locations. With generosity comes risk. In Illinois, nearly 40% of state education dollars went toward teacher pensions. In short, the system is no long a source of higher-education funding as much as it is a retirement plan for public sector workers and retirees. This is only one example of many. When state officers are trying to negotiate contracts with the very same public sector unions that put them in office, it is not going to be a benefit to the general public. They don’t really factor into the budget except as the target of higher taxes. Sure, you have heard it before: Soak the rich, dry, comb, and repeat.
Let me turn my attention to places that have better fiscal health and that are more likely to survive the hard times ahead, should they come. These tend to have a few factors in common. One of them is that most if not all are part-time legislatures. In the end, they pass fewer laws in these states. Granted, there are exceptions to the rule but the tendency of these places to be more disciplined and even a little humble about taking your tax money make them desirable. But it is NOT because they are less expensive in terms of their tax burden. Rather, a lower tax-burden is a great indicator of those states that are likely to grow and develop quicker and stronger. Illinois has lost ½ million residents net in about five years. Yes, its tax system is rough but the low potential for growth makes it a less desirable place to open a new business (including a dental practice) and to move as a resident. This is true of the worst states to open a new practice.
So, which states come out on top?
Minnesota – With low per capita debt, low unemployment, great credit rating and a very low poverty level, this is a great place to start this discussion. It also has a strong tax base which means that there is room for necessary expansion should the electorate so decide. In short, they have choices and options. But you will note one other quality of almost all of these states: the government does not take the point of view that everyone’s personal financial situation is the purview of the state. Thus, most of these states can seem a little tight fisted to some. In other words, their welfare system can seem pretty cheap.
Nebraska – This has almost the lowest debt per capita, 2nd lowest unemployment rate and a strong, triple A credit rating. Well run states tend to have low debt obligations and that is certainly true of Nebraska. In short, it has the capacity to save up for a rainy day as well as to fund large public projects without breaking a sweat. People save more aggressively here.?Despite the less than generous UI system, however, just 3.0% of the state’s labor force was unemployed over the course of 2015, the second lowest jobless rate of all states.
Wyoming – Low debt. Low unemployment. Low poverty. Outstanding credit. And Wyoming is an energy producer from which it gets a large percentage of its tax revenue. Unfortunately, this makes it vulnerable to market fluctuations. These are obviously tied to the price of a barrel of oil. Still, it has the largest rainy day fund in the nation. Wyoming’s reserve coffers amount to 50% of total annual expenditures, the largest share of any state. The Wyoming government spends $15,797 per student on education, roughly $4,800 more than the national average. But this is practical primarily because the population is small.
Utah – Again, great credit rating, low poverty, very low unemployment help. With the highest child-to-adult ratio in the country, Utah’s education system demands more resources than in many other states — and with fewer income earners comprising the tax base. However, while the state’s education budget accounts for a nation-leading 41.2% of total spending, this expenditure is equal to just $6,500 per student, the least of any state. But the educational outcomes are excellent. Utah is an example of how the relationship of how much is spent on education is not a sign on how well students do.
Utah also has a healthy economy and provides generous unemployment benefits. Just 3.5% of the state’s labor force was out of work in 2015, the fifth lowest unemployment rate of all states. For those who are out of a job, unemployment insurance covers 45.2% of wages on average, one of the highest replacement rates of any state. But, Utah has a parsimonious attitude toward pay for both the public and private sectors.
Iowa – Low debt, good credit and low poverty certainly define this state. Based on its reserves and debt levels, Iowa has some of the best fiscal management in the country. The state’s rainy day fund is equal to 10% of total expenditures, more than in a majority of states. Additionally, Iowa’s debt per capita of just $2,031 is approximately $1,500 less than the national average across all states.
Iowa has a healthy economy. Just 3.7% of the state’s workforce was unemployed in 2015, one of the lowest annual jobless rates in the country. The average unemployment insurance payment covers 45.2% of wages, the fourth highest replacement rate in the country. In case you haven’t noticed, many of these states believe that private giving to the needy is a better idea than giving to public coffers for redistribution. That goes for Churches as well. In all, the person-to-person form of charity found in most of these states is above the rate found in most others. This has the tendency to make recovering from natural disasters less expensive on government coffers. In Iowa, for example, recovery efforts often come much faster than when the State depends upon FEMA.
Texas – Like all the others on this list, low debt and excellent credit are important. But it is worth noting that Texas is a big state and is expanding quickly.
Over the last half decade, Texas has steadily risen in the ranking of best run states. Ranking 36th in 2010, Texas has climbed quickly over the years and is now ranked seventh.
Rapid population growth is often a sign of a well-run states. In the last five years, 1.2 million more people have moved to the Lone Star State than have left, the second largest net migration of any state in the country. Last year, only 4.5% of the Texas labor force was out of a job, lower than the 5.3% national unemployment rate. The state’s budget also appears well managed and relatively well equipped to weather an economic downturn. It has the highest possible credit rating from Moody’s and S&P. Also, the state has managed to save nearly a fifth of its total expenditures, a larger share of rainy day funds than all but two other states. And don’t think that other states are not jealous of these facts.
Colorado - Over the last five years, Colorado’s population increased by 4.6% from net migration, nearly three times the corresponding national growth rate. Some of the state’s new residents likely relocated there due to favorable job prospects. Just 3.1% of the Colorado labor force was out of work in October, one of the lowest unemployment rates in the country. In addition to the state’s relatively strong job market, the state also provides generous unemployment benefits.
Colorado’s GDP increased by 3.6% in 2015, the fourth most of any state in the country. Pot is credited with some of this increase. There is a public cost that we have yet to see fully realized.
Washington - Washington’s population has grown by 3.5% from net migration over the last five years, faster than most other states. One pull factor for Washington’s new residents may be the state’s advanced, growing economy. An estimated 12.5% of the Washington workforce is employed in the high-paying professional, scientific, and management field, one of the larger shares nationwide. I believe that it is Washington’s wholesale trade sector, in part bolstered by the state’s proximity to Canada and other partners across the Pacific Ocean that should get some credit. Washington ships $12,043 worth of exports per resident, more than any other state. Washington’s GDP grew by 2.9% in 2015, the eighth most nationwide.
Oregon - Many Oregon residents benefit from the state’s fast-growing economy. Oregon’s GDP grew 4.1% in 2015, more than any other state nationwide. Many of the best-performing companies in the financial and consumer discretionary industries are headquartered in Oregon, including Nike — the top performing stock in the Dow Jones Industrial Average in 2015.
Oregon also has a well balanced budget. It is one of just three states with a fully funded pension, and its $1 billion reserve fund makes up a larger share of its budget than in most states. However, a funded pension may soon come at the expense of other departments. According to the proposed budget for the 2017-19 fiscal period, a bulk of funding for the pension fund will come from local governments in the state. That, and a planned reduction in federal support for Medicaid, will likely shrink the state’s reserve fund.
South Dakota – for some reason, this surprises a lot of folks. ?The South Dakota government appears to have a better-managed budget better than nearly any other U.S. state. South Dakota has the most well-funded pension in the country, with funding exceeding pension obligations by 7.3%. The state’s surplus coffers comprise 9.0% of the current annual budget, one of the larger rainy day funds nationwide. Credit ratings agency Moody’s has given South Dakota the highest possible credit rating and a stable outlook. State lawmakers managed to produce a balanced budget despite collecting less revenue than public officials had projected. According to the state’s chief economist, one reason for the low revenue figure was the increased popularity of online shopping. Increased online shopping redirects revenue from brick-and-mortar retailers in the state to retailers in other parts of the country, ultimately decreasing tax revenue for South Dakota.
Idaho – And this is another shocker (for some).?There are more than two children younger than 18 for every five working-age adults in Idaho, the second highest child dependency ratio in the country. This means there are fewer residents earning wages — and more children to educate. Idaho is also fairly rural, which can further strain a state’s ability to educate its children through added transportation costs. Idaho’s education system demands more resources than in many other states. While the state’s education budget accounts for 31.7% of total spending, slightly more than is typical across the nation, this expenditure is equal to just $6,621 per student, the second least of any state.
Idaho lawmakers have managed some components of the budget quite well. The state pension system is 95.2% funded, far more than the 74.8% average across all states. Additionally, the state’s debt totals just $2,179 per resident, roughly $1,400 less than the average across states.
Now, to conclude, I am not saying that these are the only states to consider. But their management and careful spending mean that if you want to find a place that will have stability in the long-run, these are locations that show promise. Sure, they aren’t the only ones but they are pretty impressive.
The source of the data comes from compilations of several publications such as Forbes but are usually based upon several sources including the U.S Census Bureau, Office of Management and Budget, and Fed Reports. For more specific demographics, see our web site at www.DoctorDemographics.com.