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%