Money troubles are no stranger to many states across the U.S., and today we’re taking a closer look at a concerning aspect of their finances. In this article, we’ll dive into the top 12 states that are shouldering the heaviest debt burdens. It’s a revealing glimpse into the financial landscapes of these states and the challenges they face in managing their fiscal responsibilities
California – $520 Billion
California’s debt profile has increased due to various factors centred around long-standing pension-related liabilities. The promise of money and healthcare to retired public servants has widened the gap between available funds and liability to more than 50%. Other reasons are the persistent abuse of the system where public officials artificially inflate their salary through overtime work or lobbying for promotion before retirement.
New York – $368 Billion
New York State has identified policy and fiscal weakness as the leading cause of the rise in its debt profile. With a long-standing issue of misappropriating borrowing funds, the state couldn’t point at the uses of existing debts with long-standing capital projects languishing. According to a report by Moody, New York has a low credit rating among other states, only higher than California. This translates that New York has resorted to more borrowing in financing budget deficits, leading to more debt servicing that would grow from 5.4-5.9% within five years.
Texas – $324 Billion
Texas has an emerging debt profile as the stage and local government debt is increasing at an alarming rate. Currently standing at 324 billion dollars, the state debt profile was reported to have increased by more than 144% since the last decade. The rising debt profile can be attributed to fund mismanagement, such as growing obligations to workers’ pensions, building extravagant sports complexes, etc.
Illinois – $159 Billion
The larger chunk of Illinois debts comes from pension debt across the five state systems. With a budget deficit of $3.4 billion, Illinois inability to address the pension issue has further plunged the state into a debt mess, with the debt rising across all levels at an alarming rate. Decades of failed leaders have compounded the state’s misery due to borrowed funds mismanagement and the inability of the government to invest in other high-yielding programs.
Florida – $131 Billion
Easily this year, Florida announced a down payment of $5 billion off their humongous debt profile, easing more than $33 billion off taxpayers’ money. Before this, the star had been battling debt serving due to the inability of the state to effectively suppress the raging debt increment that was projected to increase by 21 per cent within the next ten years. This spells catastrophic economic consequences, such as the inability of the government to pay its bills.
Pennsylvania – $128 Billion
Pennsylvania has been suffering from multiple debt repayments, which has led the state government to the idea of debt consolidation to place the debt at a controllable level. Excessive government spending and borrowing to this level have caused severe record-setting inflation and gnashing supply shortage. For instance, government expenditure has increased by a whopping 35 per cent or 10.6 billion dollars.
Massachusetts – $98 Billion
Massachusetts is seventh on this list, with a debt profile of $98 billion. This is evident in the state’s inability to shoulder the burden of quality education, healthcare, pension funds, research and technology. The economic downturn could be the cause of the rising debt burden and the inability of the state to meet its debt servicing obligations.
Ohio – $93 Billion
According to the United States Census Bureau, Ohio has a debt of 93 billion dollars and $10 245 per capita, with a credit rating slightly indicating low-interest cost on the state bonds issued to finance large-scale capital projects such as road construction, healthcare and other public infrastructure. Ohio faltered through the rise of the taxpayer burden that restricted the state from paying the money it owes in bills, including those retirement obligations like pension plans and healthcare benefits for its citizen.
New Jersey – $91 Billion
The majority of New Jersey debt comes from non-bonded obligations like retirement benefits. The state saw a monumental increase in debt post-pandemic when its debt profile rose by 22% in the 2021 fiscal year. At the end of the 2022 fiscal year, the government borrowed 4 billion dollars in anticipation of the budget deficit. This has given the tags a lifeline, evident in its repayment of $3 billion in debt and interest to save taxpayers more than $600 million. As outlined in the proposed 2023 fiscal year, the state has made a significant stride in its obligations to fulfil its pension payment obligations for the second year in a row.
Washington – $90 Billion
Washington’s combined state and local debt makes 90 billion dollars, with a total expenditure of $65.8 billion. The state’s largest spending area is elementary and secondary education, which costs nearly $2,655 per capita. The cascading effect of the state investment in education, environmental initiative, and healthcare contributes to Washington’s debt burden.
Michigan – $82 Billion
As of September 30, 2022, the state has outstanding debt totalling $82 billion with a projection of more than 20% increment by 2027. The key driver for this monumental increment is pension liabilities and healthcare expenses. Michigan’s high debt level has affected the state from accessing new loans to stabilize its dwindling economy, leading to backlogs of capital projects and an ineffective debt repayment plan.
Virginia – $70 Billion
Virginia government’s total debts, including long-term and short-term debt, stood at $70 billion in 2023. The persistent increment in Virginia’s debt profile can be linked to increased infrastructure, education and transportation spending. The stage currently has a strong credit rating, indicating the increasing debt burden, which might lead to general economic problems.