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State Debt Reaches $2.7 Trillion, New analysis Reveals
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A new reason Foundation analysis reveals that state government debt reached $2.7 trillion at the end of 2023, amounting to approximately $8,000 per person nationally. The report, based on state governments’ own financial reports, paints a concerning picture of mounting liabilities across the country, driven largely by long-term obligations like public pension benefits and retiree healthcare.
National Overview of State Debt
As of the end of 2023, California held the largest share of state government debt wiht $497 billion in liabilities. Following California, the states with the highest overall debt were new York ($233 billion), Illinois ($223 billion), Texas ($217 billion), and New Jersey ($213 billion). Massachusetts reported $120 billion in liabilities, with Connecticut, Washington, pennsylvania, and Florida also carrying meaningful debt loads.
However, not all states are facing the same financial pressures. Ten states – South Dakota, Idaho, Nebraska, montana, New Hampshire, Utah, Vermont, Rhode Island, Wyoming, and Maine – each reported less than $10 billion in debt at the end of 2023.
Per Capita Debt: Connecticut Leads the Nation
While California has the largest total debt, Connecticut carries the heaviest per capita burden, with $26,187 of debt per resident as of the end of 2023. New Jersey is the only other state exceeding $20,000 in liabilities per capita, reporting $22,968.
The Reason Foundation identified 13 states – Connecticut, New Jersey, Hawaii, Delaware, Illinois, Massachusetts, Wyoming, Alaska, North Dakota, California, Washington, New York, and Vermont – with more than $10,000 in debt per resident.
Among more populous states, Texas reported $7,443 in per capita debt, Pennsylvania $5,872, and florida $3,334. Conversely, Tennessee, Utah, Nebraska, Idaho, South Dakota, Oklahoma, and Arizona all reported less than $3,000 in per capita debt.
Unfunded Pension Obligations: A Major Driver
Unfunded public pension obligations represent a significant portion of state debt. Nationally, states reported $664 billion in unfunded public pension obligations, representing 35% of their total long-term debt, or approximately $2,000 per capita. Illinois leads the nation in pension debt with $145 billion, the only state surpassing $100 billion in this category. California’s pension debt totaled $90 billion, largely attributable to the california Public Employees’ Retirement System and the California State Teachers’ Retirement System.
Similarly, other post-employment benefits (OPEB), primarily retiree healthcare, represent a ample liability. State governments reported $421 billion in OPEB debt, or about $1,300 per capita nationally. California, New Jersey, New York, and Texas stand out with the largest OPEB debts, totaling $82 billion, $75 billion, $66 billion, and $53 billion respectively.
Bonded Debt: A Closer Look
Bonds, loans, and notes account for 33% of all state long-term liabilities, totaling $630 billion nationally, or about $1,900 per American. California holds the largest outstanding bond debt at $111.8 billion, followed by Texas ($67 billion), New York ($50 billion), and Massachusetts ($46 billion). Notably, Indiana and Nebraska reported zero outstanding bond debt at the end of 2023.
Hawaii and Connecticut lead the nation in per capita bonded debt, with over $8,000 per resident. California ranked 10th with $2,828 per resident, while Florida ranked 39th with $785 per capita.
Data and Methodology
the Reason Foundation’s State and Local Government Finance Report compiles liabilities across all levels of government – state, county, municipal, and school district – covering 331 million Americans.All figures are sourced from state governments’ annual comprehensive financial reports, with 2023 data being the most recent available. Data for Nevada is based on 2022 figures due to reporting delays. The foundation acknowledges the potential for discrepancies given the scale of data collection and encourages reporting of any identified errors.
Readers seeking more detailed information can access the GovFinance Dashboard for personalized reports on municipal entities and deeper insights into
