Did States Become Any Less Reluctant to Borrow Last Year?

The South Dakota State Capitol's Rotunda.

The South Dakota State Capitol's Rotunda. Shutterstock


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Not so much, according to a new Moody’s Investors Service report.

Reflecting a shyness on the part of states to engage in new borrowing, the amount of outstanding U.S. state debt supported by taxes remained mostly stagnant in 2015 compared to the previous year, according to a report a credit rating agency released Friday.

That finding comes despite low interest rates and recent upticks in tax collections. Growth for what’s known as state net tax-supported debt, or NTSD, was up 0.6 percent in 2015 compared to 2014, according to the report, which was issued by Moody’s Investors Service.

A total of $512 billion of the debt was outstanding last year, lower than a 2013 peak of $516 billion.

“The recent slowdown in debt levels highlights states’ reluctance to take on new long term obligations despite continued increases in tax revenue,” Genevieve Nolan, a Moody’s vice president and senior analyst said in a statement.

The report notes that, during 2014, the amount of tax-supported debt outstanding went down for the first time in the 29 years it has been tracked by Moody’s.

States issue debt for variety of reasons and pay it off over periods that can span decades. It is commonly used to finance infrastructure and public works, such as highways, prisons and higher education facilities. Weighing whether to issue debt can involve a wide range of considerations, like interest rates, and the fiscal health, capital needs and politics in a state.

According to the Moody’s report, 34 states saw debt level declines in 2015, with the largest decreases taking place in Nebraska, North Dakota and Utah.

Only two states experienced double-digit increases in NTSD: Kansas and South Dakota.

A significant driver of the 40 percent increase in Kansas was $1 billion of pension obligation bonds the state issued last August. These were issued in an attempt to help shore up the Sunflower State’s underfunded retirement system for public employees.

The five states with the highest per capita net tax-supported debt levels included: Connecticut ($6,155), Massachusetts ($5,592), Hawaii ($4,557), New Jersey ($4,141) and New York ($3,021). The median figure for all 50 states was $1,025.

Pointing to downturns in commodities markets, uncertainty over federal fiscal policy and issues tied to health care funding, the analysts that authored the Moody’s report said they do not expect a significant upswing this year in state debt burdens.

Bill Lucia is a Reporter for Government Executive’s Route Fifty.

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