AUGUSTA – A ranking aimed at measuring a state’s finances and debt management indicates Maine – like most states – has been slipping since the first comparison was released in 2002.

Only 12 states have positive numbers in 2004. Maine is ranked 38th among the 50 states.

The index calculates how much money would be left over if each state were to cease operations and pay off all its debts, including pensions.

If there would be money left over, a state is in the positive column and would distribute the cash to residents. If it were in the negative column, as is Maine, the index is the amount a state would have to levy on each resident to cover its debts.

All the New England states would need to levy their residents to pay off their debts, with Vermont needing the least, at $402 per resident, and Connecticut the most, at $5,012 per resident.

Maine is in the middle of the New England states, with a need to get $2,044 from each resident to pay off its debt. That is $759 more than in 2002.

The index represents a combination of a state’s financial assets, its debt and its pension fund liabilities, the report by State Policy Reports says.

The policy organization was formed by the National Governors’ Association and the National Conference of State Legislatures to provide what they term unbiased data and analysis comparing the states.

“I am not surprised that we, like other states, have slipped,” Gov. John Baldacci said Friday. “We think we are doing better now than what these numbers show. They are a snapshot, and they were taken when we were at our worst.”

Baldacci said surplus funds at the end of the last budget year were used to start rebuilding reserve funds. He said they are not as large as he would like, but that the state is “going in the right direction.”

The index was created more than a decade ago to provide a way to measure state financial management. It’s not easy to compare the states because each has distinctive ways of handling and tracking finances.

“It’s a hypothetical that just isn’t going to happen,” state Finance Commissioner Rebecca Wyke said Friday. “So, no, I don’t see much value to this index. States don’t become insolvent.”

Wyke said the report relies on census data from 2002 in some of its computations, and Maine fares better when newer estimates are used from the U.S. Census Bureau.

“These are extremely helpful,” said Sen. Peter Mills, R-Cornville. He said he wishes “we had more of these studies that compare what we are doing with other states. This is a fabulous exercise that shows us a lot about our finances.”

Mills was the author of a Republican memo last week that argued Maine’s debt situation has been understated by the Baldacci administration.

The study not only counted all bonds authorized by voters or any state agency, it also added the debt “hidden” in the budget as payments for facilities and equipment. It concluded that more than $1 in every $5 in the state budget goes to pay debt.

“This shows that, like many other states, we have spent the cupboard bare to pay the bills and we don’t have funds set aside like we used to,” Mills said. “I don’t know how we will do it, but we need to start setting aside money in what we used to call a rainy-day fund.”

Rep. Joe Brannigan, D-Portland, is co-chair of the Legislature’s Appropriations Committee and agreed with Mills.

He said Maine has used its cash reserves to pay its bills, which is why the reserves were created in the first place. He also agreed the study should be used by the state as a tool to see how Maine stacks up with other states.

“We should be looking at the things they are looking at in this study,” he said. “These are the same things the bond houses look at when they set our bond rating.”

While the state faces serious financial problems this year, they are not as serious as those Brannigan faced in the early 1990s when he was Senate co-chair of the committee, he said.

He said not only did the governor and Legislature at the time approve every “gimmick” in the book, they also raised the sales tax a penny and made big cuts in programs.

“We have been able to better weather this because we did set aside reserves when we had extra revenues in the boom times,” Brannigan said.

Mills said a significant reason Maine ranked 38th overall in the index is the unfunded liability in the state retirement system.

Maine ranked 47th among the 50 states in the index used to measure how much a state is putting into its retirement system, compared with what it should be contributing.

“I think we might be even worse off than what this shows,” Mills said. “I don’t think this takes into account the promise we put in the budget, over my objections, and that of some others, for funding the health insurance of retirees.”

Mills said under then-Gov. Angus King, more than $80 million was set aside in a fund to help pay for the unfunded cost of health coverage for retirees. He said that was one of the reserve funds emptied to balance the state budget.