A new study from the Reason Foundation examining the financial health of state and local governments found Virginia posted a clean bill of fiscal health statewide, while Maryland carried one flag at the state level — with far more variation showing up among both states’ individual counties and school systems.
The study reviewed audited financial reports for more than 20,000 state and local government entities, measuring each against eight financial-stress indicators covering debt levels, available cash, spending relative to revenue, and liabilities per resident or student. A government earns a “red flag” each time it crosses one of the study’s thresholds; researchers were careful to note that a single flag doesn’t necessarily signal financial trouble — the measure is meant to identify areas worth closer scrutiny, not to declare a crisis.
Virginia was one of 23 states with zero red flags. Its local governments told a more mixed story: Fairfax County posted two flags, Richmond and Norfolk one each, while Chesapeake and Virginia Beach had none. Among Virginia’s largest school systems, Chesterfield County and Fairfax County schools each recorded three flags — the most in the state. Chesterfield’s schools reported about $680 million in liabilities against roughly $254 million in assets, while Fairfax schools carried nearly $4.1 billion in liabilities against about $3.9 billion in assets, working out to roughly $22,777 in liabilities per student — above the study’s $20,000 per-student warning line.
Maryland’s single state-level flag was tied to its unrestricted net position, a measure of what’s left over after accounting for certain financial obligations and restrictions. At the county level, Baltimore County and Prince George’s County each posted four flags, while Montgomery and Anne Arundel counties had one apiece. Baltimore City stood out with five of the eight possible flags — the city reported about $9.7 billion in liabilities, more than $16,000 per resident, and its total liabilities came in at more than double its annual revenue.
Maryland’s school systems varied just as widely. Prince George’s County Public Schools posted four flags; Howard County and Montgomery County school systems each had three; Baltimore County’s school system had two; and Anne Arundel County’s had one. Baltimore City Public Schools was the exception nationally as well as locally — it recorded zero flags and was one of only two of the country’s 100 largest school districts to avoid all eight measures entirely, alongside Rutherford County Schools in Tennessee.
The Maryland and Virginia results sit within a wider national picture that skewed largely positive: 59 of the nation’s 100 largest counties recorded fewer than two flags apiece. But some jurisdictions elsewhere fared far worse than anything seen in either state — Nassau County, New York, and Miami-Dade County, Florida, each posted five flags, while Chicago and New York City each triggered seven of the eight measures. Fort Bend Independent School District in Texas was the worst-performing large school system nationally, with seven flags.
The report’s authors also noted that financial stress can compound when multiple layers of government — state, county, city and school district — each carry their own red flags, citing Chicago as an example where residents’ combined debt burden across all four levels of government reaches roughly $49,431 per person.
The findings rely largely on fiscal year 2023 data, meaning they reflect a snapshot from roughly two years ago rather than current government finances.
