## STATE INDICES

MATTERS provides additional insights into the national economic landscape by leveraging the data in the MATTERS system to create indicators which measure the competitiveness of states. These five MATTERS indices align with each of the data categories in the MATTERS system: Fiscal Stability, Talent, Tax/Financial Climate, Cost of Doing Business and Quality of Life. Each consists of a weighted combination of datasets in the MATTERS system.

The state rankings are displayed in the overview maps on the MATTERS homepage. A detailed view of the most recent indexes for each state, along with the values of the underlying data, can be accessed by clicking through to the individual State Profile pages.

The MATTERS indices are published biannually. At each update, a new version of the indices will be computed using the most up to date data available. The methodology for computing the MATTERS indices is given below.

## DATA PRE-PROCESSING

**Missing Values:** The metrics in the MATTERS system often
have data available for different years. If a value for some
metric is missing for a given year, the closest previous value
is used. If there is no previous value, the closest possible
value is used.

**Normalization:** The values of metrics in the system vary
greatly, some are percentages which only vary by a few tenths of
a point, some are numbers in the millions representing
populations, or GDP. The values must be normalized so that large
values do not dominate. We use a standard z-transform to scale
and center the data. For each metric, we subtract the mean value
across all states, and divide by the standard deviation. This
results in each metric having a mean of zero and standard
deviation roughly equal to one, making the different metrics
comparable.

**Inverted Trends:** Typically when looking at trends, high
values are considered better than low values. However, for some
metrics the opposite is true. For instance, a low unemployment
rate is preferred to a high rate. Negative coefficients correct
for data with inverted trends,

**Values vs. Rankings:** States can be ranked according to
their computed values. However, this ranking does not capture
all the information in the index. The computed values fall in a
range of roughly -100 to 100. While these values are not easy to
interpret on their own, they do show relationships between
states. Therefore, the raw values are available for inspection
and analysis in the Data Explorer. Rankings are shown in the
State Profile page.

## MATTERS INDEX COMPUTATION

Each index is computed by combining a set of datasets (or metrics) \( \{m_1, m_2 ...m_n \}\), as a weighted sum. The coefficient \(c_i\) for each dataset determines its weighting in the sum. The general formula for each index is:

$$\frac{c_1 * m_1 + c_2 * m_2 + \dots + c_n *m_n}{c_1 + c_2 + \dots +c_n}$$The metrics used and their weights are given in the tables below.

**Fiscal Stability**

Metric | Weight |
---|---|

Fiscal Balance | 12.5% |

State Reserve Fund Level | 12.5% |

State Debt Level | 12.5% |

Short Term Cash Solvency | 12.5% |

Medicaid Spending as a Share of State Revenue | 12.5% |

Unfunded Pension Liability | 12.5% |

Retiree Health Benefit Liability | 12.5% |

Annual Gross State Product Growth Rate | 12.5% |

**Quality of Life**

Metric | Weight |
---|---|

School Quality | 25% |

Housing Affordability | 25% |

Real Personal Income | 20% |

Health Rank | 15% |

Crime Rate | 15% |

**Talent**

Metric | Weight |
---|---|

STEM Degrees Per Capita | 35% |

Technology Employment as % of Total Employment | 35% |

Bachelor Degree Holders in Workforce | 20% |

Relocation of College Educated Adults | 10% |

**Tax/Financial Climate**

Metric | Weight |
---|---|

Personal Income Tax | 30% |

Sales Tax | 20% |

Corporate Income Tax | 20% |

Property Tax | 15% |

Access to Capital | 15% |

**Cost of Doing Business**

Metric | Weight |
---|---|

Average Family Health Insurance Premium | 20% |

Median Earnings | 60% |

Unemployment Insurance Premium Per Employee | 5% |

Retail Price of Electricity | 15% |

Please note that in any tax-related information, data or metrics are reflective of the tax policy that is generally applicable to the broadest set of taxpayers. Please note that in many instances and jurisdictions, various and differing tax regimes may be applicable. Similarly, tax-related information contained within MATTERS is not intended to be tax advice. Neither MATTERS nor the Massachusetts High Technology Council is a tax advice expert offering tax advice.

Neither MATTERS nor the Massachusetts High Technology Council makes any representations, warranties, or assurances as to the accuracy, currency or completeness of the content contain in MATTERS or any sites linked to this site.