A Tool for Better Debt Comparisons

Navigate to:

A Tool for Better Debt Comparisons

Overview

Because no universal guidelines exist for how much debt state governments can afford, when policymakers try to assess how much borrowing to take on for projects such as roads, bridges, and schools, they often compare debt levels in their state to those of others. To make these comparisons, many policymakers evaluate how their state stacks up against geographic neighbors or other states with a common credit rating.

But selecting a peer group based only on these traits overlooks many factors that influence borrowing levels. States with growing populations, for example, may wish to borrow more to ensure that their infrastructure adequately serves residents’ needs. Similarly, having a debt limit or other constraining budget policy can influence the share of borrowing taken on by state governments or localities.

This interactive tool allows users to compare debt levels across more tailored peer groups, including comparing states with similar borrowing practices, constraints, and needs. The tool includes key measures that may influence borrowing levels, such as debt limit policies; the degree to which borrowing is conducted by the state itself, compared to component units such as independent agencies and authorities; and the division of borrowing between the state and local governments. The tool also includes traits that states more commonly consider when choosing peers, such as credit ratings and geographic proximity.

In the “State Comparison” section, users can compare these data, including debt levels, for any two states, or any state to the U.S. median. In the section labeled “50-State Data,” users can sort and group all 50 states using multiple criteria, allowing users to identify groupings using a mix of measures. Information about the measures and the underlying data may be found in the “About the Data” section at the bottom of this page.

States can use these data to select more appropriate peer groups, giving them a deeper understanding of how similarly positioned states manage their borrowing.

State Comparison

Compare
    to

      (type in a state name or "U.S. Median" to make a comparison)

      Borrowing practices

      General obligation debt limit type

      U.S. Median: N/A

      Alabama: Constitutional Amendment

      Centralization

      U.S. Median

      71.2%

      Alabama

      65.3%

      Local-state borrowing division

      U.S. Median

      58.3%

      Alabama

      70.1%

      Fiscal conditions and infrastructure needs

      Revenue volatility

      U.S. Median

      5.0

      Alabama

      4.6

      Population growth

      U.S. Median

      6.2%

      Alabama

      3.3%

      Debt levels

      Debt per capita

      U.S. Median

      $3,198

      Alabama

      $1,839

      Debt as a percentage of state personal income

      U.S. Median

      7.3%

      Alabama

      4.8%

      Credit rating

      2015

      U.S. Median: N/A

      Alabama: AA

      2018

      U.S. Median: N/A

      Alabama: AA

      50-State Data

      Debt as a percentage of state personal income. Total debt relative to state personal income, a measure of economic resources. more

      Sort by: A–Z | Low–High | High–Low

      Select a state to highlight | Clear all

      Alabama

      4.8%

      Alaska

      13.3%

      Arizona

      5.3%

      Arkansas

      4.3%

      California

      7.1%

      Colorado

      6.1%

      Connecticut

      14.4%

      Delaware

      11.2%

      Florida

      3.6%

      Georgia

      3.1%

      Hawaii

      12.6%

      Idaho

      5.7%

      Illinois

      9.8%

      Indiana

      8.1%

      Iowa

      4.3%

      Kansas

      5.6%

      Kentucky

      8.1%

      Louisiana

      8.8%

      Maine

      8.8%

      Maryland

      7.9%

      Massachusetts

      17.6%

      Michigan

      7.7%

      Minnesota

      6.0%

      Mississippi

      7.1%

      Missouri

      7.5%

      Montana

      7.3%

      Nebraska

      1.9%

      Nevada

      2.7%

      New Hampshire

      11.3%

      New Jersey

      12.4%

      New Mexico

      8.5%

      New York

      11.8%

      North Carolina

      4.2%

      North Dakota

      4.9%

      Ohio

      6.4%

      Oklahoma

      5.2%

      Oregon

      7.3%

      Pennsylvania

      7.4%

      Rhode Island

      17.0%

      South Carolina

      7.7%

      South Dakota

      8.0%

      Tennessee

      2.1%

      Texas

      3.5%

      U.S. Median

      7.3%

      Utah

      6.2%

      Vermont

      10.3%

      Virginia

      6.4%

      Washington

      8.5%

      West Virginia

      10.6%

      Wisconsin

      8.3%

      Wyoming

      2.5%

      About the Data

      The measures were selected based on evidence in the debt affordability and management literature that they relate to state debt levels, the feasibility of collecting the data, and a desire to avoid redundancy.1 Pew also limited the number of measures to make the tool easy to use and understand.

      This tool is not intended to be an exhaustive catalog of the factors that might affect state borrowing levels. Instead, the tool is intended to help states consider relevant criteria when constructing peer groups.

      Each measure is described below.

      General obligation debt limit type (2018)

      General obligation (GO) debt is backed by a state’s full faith and credit, the strongest possible pledge. As a result, GO debt is typically a state’s highest rated and lowest cost form of debt.2

      All but two states have legal GO debt limits, which vary in restrictiveness and structure. For example, Connecticut limits this debt to 1.6 times its total estimated general fund tax receipts, while Arizona effectively prohibits its issuance.3

      Pew has classified each state’s limit for GO debt as one of the following types:

      • Constitutional amendment. Three states—Alabama, Ohio, and West Virginia—require an amendment to their constitutions to issue GO debt.
      • Metric. In 11 states—Connecticut, Georgia, Hawaii, Mississippi, Nevada, New Hampshire, North Dakota, Oregon, Tennessee, Utah, and Wisconsin—debt or annual debt service is not allowed to exceed a certain metric-based threshold. Tennessee, for example, caps debt service at 10 percent of combined revenues in its general, debt service, and highway funds.
      • Metric-based with referendum to exceed. North Carolina, Pennsylvania, and Wyoming use a metric to cap debt but allow issuance above the cap with voter approval.
      • No limit. Maryland and Vermont place no restrictions on GO debt.
      • Prohibition. Arizona, Colorado, Indiana, and Nebraska effectively prohibit GO debt. Indiana law forbids any GO debt to be issued; the others authorize amounts so low—$350,000 or less—as to be equivalent to prohibitions.
      • Referendum and/or supermajority. Thirteen states—Alaska, Arkansas, California, Idaho, Iowa, Kansas, Kentucky, Maine, Michigan, Minnesota, Missouri, Montana, and Rhode Island—require some combination of voter approval and/or a legislative supermajority (generally, three-fifths or two-thirds) to issue debt.
      • Referendum and/or supermajority and metric. Fourteen states—Delaware, Florida, Illinois, Louisiana, Massachusetts, New Jersey, New Mexico, New York, Oklahoma, South Carolina, South Dakota, Texas, Virginia, and Washington—require a referendum and/or supermajority and have a metric-based cap on debt or debt service.

      Note: The classification system is a variation on the approach taken in D. Roderick Kiewiet and Kristin Szakaly, “Constitutional Limitations on Borrowing: An Analysis of State Bonded Indebtedness,” The Journal of Law, Economics & Organization 12, no. 1 (1996): 62-97, https://www.jstor.org/stable/765039?seq=1#page_scan_tab_contents .

      Source: Pew analysis of state constitutions and statutes

      Centralization (fiscal year 2014)

      In some states, component units of government, such as independent agencies and authorities, conduct much of the borrowing, rather than the primary state government. Centralization measures primary government debt as a share of the total debt issued by the primary government and its component units. Across the states, centralization ranges from 0 percent—meaning that all borrowing is by entities other than the primary government—to 100 percent, meaning the primary government does all of the borrowing.

      Component unit debt generally relies less on state general funds for repayment than primary government debt does. Often, lenders have no legal claim on state general funds if a component unit defaults. As a result, state comparisons based only on total debt may be misleading. Montana and Delaware, for example, have about the same total debt, but most of Montana’s debt is held by component units and most of Delaware’s is held by the state. When comparing measures of “total debt,” choosing peers based on the degree of centralization of debt may provide more appropriate comparisons.

      Note: To calculate centralization in a state, Pew calculated primary government debt from states’ 2014 comprehensive annual financial reports. It then calculated debt held by major component units, as reported in their annual financial statements. Adding the two sums created a measure of “total debt,” from which the percentage held by the primary government—centralization—was determined.4

      Source: Pew analysis of fiscal year 2014 state comprehensive financial annual reports

      The local-state borrowing division (2015)

      In some states, local governments are responsible for paying for most capital projects within their jurisdictions. In others, the state government is responsible for those projects, increasing its overall borrowing. The division of borrowing responsibility is related to the debt limit: In general, local governments in states with highly restrictive state debt limits have higher debt levels.5 This measure compares local government borrowing to the combined debt held by the state and local governments. Higher numbers indicate a greater share of total debt is held by local governments. The local-state borrowing division ranges from 17.9 percent to 88 percent.

      Source: Pew analysis of data from U.S. Census Bureau, “Annual Survey of State and Local Government Finances: 2015 Data Release” (2018), https://www.census.gov/programs-surveys/gov-finances/newsroom/updates/release.html

      Revenue volatility (1998-2017)

      Revenue volatility is the annual fluctuation in tax collections and is affected by several factors, including a state’s mix of tax streams. The score reflects the standard deviation of yearly percentage change in total tax revenue between 1998 and 2017.6 Pew controlled for the effects of tax policy changes using the National Conference of State Legislatures’ State Tax Actions Report.

      A low volatility score means that revenue levels were similar from year to year, and a high score indicates that revenue grew or declined more dramatically. The scores range from 2.7 to 37.6. States with more volatile revenue face shared budget challenges. When revenues drop, fixed costs—such as debt service—may crowd out operating spending.7

      Sources: Pew’s calculation of volatility scores is based on data from the U.S. Census Bureau’s Annual Survey of State Government Tax Collections historical data series for 1997 to 2017, and the National Conference of State Legislatures’ “ State Tax Actions” reports for 1997 to 2016. For additional information about the methodology and underlying data, please see: The Pew Charitable Trusts, “Tax Revenue Volatility, FY 1998-2017,” last modified Aug. 29, 2018, http://www.pewtrusts.org/en/research-and-analysis/data-visualizations/2014/fiscal-50#ind6

      Population growth (2008-17)

      Research has found that population growth in a state is associated with an increase in borrowing. 8 From 2008 to 2017, state populations shrank or grew within a range of -1.3 percent to 16.5 percent.

      Sources: Pew analysis of data from U.S. Census Bureau, “Annual Survey of State and Local Government Finances: 2015 Data Release” (2018), https://www.census.gov/programs-surveys/gov-finances/newsroom/updates/release.html ; U.S. Census Bureau, “Annual Estimates of the Resident Population for the United States, Regions, States, and Puerto Rico: April 1, 2010 to July 1, 2017,” Table 1, https://www2.census.gov/programs-surveys/popest/tables/2010-2017/state/totals/nst-est2017-01.xlsx ; U.S. Census Bureau, “Intercensal Estimates of the Resident Population for the United States, Regions, States, and Puerto Rico: April 1, 2000 to July 1, 2010,” Table 1, https://www2.census.gov/programs-surveys/popest/tables/2000-2010/intercensal/state/st-est00int-01.xls

      Debt levels (2015)

      States compare their debt levels to peers through a variety of measures, including total outstanding debt and metrics that normalize debt levels by population or wealth to create a level scale across states of various sizes. Pew’s tool includes two ratios: debt per capita and debt as a percentage of state personal income. States often use a ratio of debt service to revenue when they evaluate debt levels and set limits. This ratio is not included in this tool due to cross-state comparability challenges.9

      Debt per capita

      Debt per capita, which measures total debt against a state’s population, facilitates comparisons between states of different sizes. It also helps policymakers understand the debt burden on individual residents, who provide much of the revenue states use to repay debt in the form of taxes and user fees. The range of debt per capita is $870 to $11,059.

      Sources: Pew analysis of data from U.S. Census Bureau, “Annual Survey of State and Local Government Finances: 2015 Data Release” (2018), https://www.census.gov/programs-surveys/gov-finances/newsroom/updates/release.html ; U.S. Census Bureau, “Annual Estimates of the Resident Population for the United States, Regions, States, and Puerto Rico: April 1, 2010 to July 1, 2017,” Table 1, https://www2.census.gov/programs-surveys/popest/tables/2010-2017/state/totals/nst-est2017-01.xlsx

      Debt as a percentage of state personal income

      Considering a state’s debt level relative to its available resources for repayment is a common practice used by states, credit rating agencies, and academics.11 State personal income is one measure of a state’s ability to service debt. Debt as a percentage of personal income ranges from 1.9 percent to 17.6 percent.

      Sources: Pew analysis of data from U.S. Census Bureau, “Annual Survey of State and Local Government Finances: 2015 Data Release” (2018), https://www.census.gov/programs-surveys/gov-finances/newsroom/updates/release.html ; U.S. Bureau of Economic Analysis, “SA1 Personal Income Summary: Personal Income, Population, Per Capita Personal Income,” https://www.bea.gov/data/income-saving/personal-income-by-state

      Credit ratings (September 2018 and September 2015)

      This tool allows users to group states by S&P Global Ratings’ credit ratings to compare those with similar credit profiles. The user can select credit ratings from 2018 or 2015 to look at either recent information or information corresponding to other data points in this tool.

      Note: Pew collected ratings on general obligation issuance as of September 2018 and September 2015. If the state does not issue GO bonds, the rating on the senior-most tax-backed issuance was used instead.

      Source: S&P Global Ratings, state briefs, https://www.spratings.com/en_US/topic/-/render/topic-detail/u-s-states

      Census region and division

      This tool allows users to group states by U.S. Census region and subregion (“division”) to make geographical comparisons. There are four regions and nine divisions. Although geography alone is not always a useful benchmark, state officials often wish to understand more about their neighbors’ conditions.

      Source: U.S. Census Bureau, “Census Regions and Divisions of the United States,” https://www2.census.gov/geo/pdfs/maps-data/maps/reference/us_regdiv.pdf


      1. The literature reviewed included Robert W. Wassmer and Ronald C. Fisher, “State and Local Government Debt, 1992-2008,” State Tax Notes, Aug. 15, 2011: 427-436; and W. Bartley Hildreth and Gerald J. Miller, “Debt and Local Economy: Problems in Benchmarking Local Government Debt Affordability,” Public Budgeting & Finance 22, no. 4 (2002): 99-113.

      2. The Pew Charitable Trusts, “Strategies for Managing State Debt” (2017), http://www.pewtrusts.org/en/research-and-analysis/reports/2017/06/strategies-for-managing-state-debt .

      3. Ibid.

      4. For more detail on these data, see The Pew Charitable Trusts, “Strategies for Managing State Debt,” methodology.

      5. For a discussion of the relationship between debt limits and local borrowing, see D. Roderick Kiewiet and Kristin Szakaly, “Constitutional Limitations on Borrowing: An Analysis of State Bonded Indebtedness,” The Journal of Law, Economics & Organization 12, no. 1 (1996): 62-97, https://www.jstor.org/stable/765039?seq=1#page_scan_tab_contents .

      6. The Pew Charitable Trusts, “Tax Revenue Volatility Varies Across States, Revenue Streams,” accessed Sept. 10, 2018, http://www.pewtrusts.org/en/multimedia/data-visualizations/2014/fiscal-50#ind6 .

      7. One study found that as economic volatility increases, states prefer to pay for infrastructure projects with cash rather than through financing. Wen Wang, Yilin Hou, and William Duncome, “Determinants of Pay-as-You-Go Financing of Capital Projects: Evidence From the States,” Public Budgeting & Finance 27, no. 4 (2007): 18-42, https://doi.org/10.1111/j.1540-5850.2007.00892.x .

      8. Roy Bahl and William Duncombe, “State and Local Debt Burdens in the 1980s: A Study in Contrast,” Public Administration Review 53, No. 1 (1993): 31-40.

      9. States do not use uniform definitions of debt service in their comprehensive annual financial reports. Each reports debt service from a unique combination of disparate funds. Using these sources to create a comparable cross-state measure of debt service to revenues is therefore difficult without a detailed understanding of each state’s reporting practices. As a result, many cross-state comparisons of debt service to revenues are inexact.

      10. U.S. Census Bureau, “Annual Survey of State Government Finances,” https://www.census.gov/econ/overview/go1500.html . Examples of component units, which are legally separate entities from the primary state government but perform key functions, include housing authorities, economic development corporations, and universities.

      11. Jennifer Weiner, “A Guide to State Debt Affordability Studies: Common Elements and Best Practices,” New England Public Policy Center at the Federal Reserve Bank of Boston (2013), https://www.bostonfed.org/publications/new-england-public-policy-center-policy-brief/2013/a-guide-to-state-debt-affordability-studies-common-elements-and-best-practices.aspx ; Charles Brecher, Kurt Richwerger, and Marcia Van Wagner, “An Approach to Measuring the Affordability of State Debt,” Public Budgeting & Finance 23, no. 4 (2003): 65-85, https://onlinelibrary.wiley.com/doi/abs/10.1111/j.0275-1100.2003.02304004.x .

      State Debt
      State Debt
      Article

      New Interactive Tool Helps States Evaluate Debt

      Quick View
      Article

      New Interactive Tool Helps States Evaluate Debt

      A new interactive tool from The Pew Charitable Trusts can help state leaders better assess their debt and see how their practices and positions compare with those in other states.

      Construction site
      Construction site
      Report

      Strategies for Managing State Debt

      Quick View
      Report

      As state budgets recover from the effects of the Great Recession of 2007-09, lawmakers are looking for ways to prepare for the next downturn. At the same time, states are increasingly interested in taking advantage of low interest rates to borrow money for key infrastructure projects that may have been put on hold during the recession

      Pensions
      Pensions
      Fact Sheet

      How States Can Assess the Affordability of Their Debt: 2017

      Quick View
      Fact Sheet

      When a state government faces a large expense, officials often choose to borrow the money to pay for the project, freeing up cash on hand to meet day-to-day expenses. Borrowing for long-lasting infrastructure also spreads the cost over the generations of taxpayers who benefit from its use.

      The front facade of the Supreme Court of the United States in Washington, DC.
      ian-hutchinson-U8WfiRpsQ7Y-unsplash.jpg_master

      Agenda for America

      Resources for federal, state, and local decision-makers

      Quick View

      Data-driven policymaking is not just a tool for finding new solutions for emerging challenges, it makes government more effective and better able to serve the public interest.