State governments are issuing debt at a slower rate than at any time in the past two decades and stockpiling cash surpluses in rainy-day funds, according to a new report, reflecting a wariness to new debt following a recession that forced states to borrow billions.
The combined tax-supported debt of all 50 states grew by just $2 billion in 2013, to $518 billion, an increase of just 0.4 percent, while per capita debt issued by states declined 2 percent from the previous year.
That’s far below the 6.5 percent average growth of the past decade and a fraction of recession-era peaks in 2004 and 2010.About half the states saw their amount of net tax-supported debt decline from the previous year in 2013. Budget surpluses in most states allowed them to pay off debt without issuing new bonds, the report from Moody’s Investors Service found. Even states with some of the biggest debts in the nation, such as California, cut their obligations by significant margins.
The slowdown in debt issuance comes as a new conservative attitude toward debt takes hold. States that borrowed heavily during the recession want to put their fiscal houses in order.
At the same time, states are saving more money in rainy-day funds depleted by the recession.
The amount of debt that states carry as a percentage of personal income fell for the first time in five years, Moody’s found, from 2.8 percent in 2012 to 2.6 percent last year. Sixteen states carry debts of less than 2 percent of personal income.
Hawaii, Connecticut and Massachusetts lag behind their peers. Hawaii carries $6.6 billion in tax-supported debt, equal to about 10.6 percent of the state’s personal income.
Connecticut and Massachusetts carry debt worth more than 9 percent of personal income.
California remains the nation’s largest debtor, at $94 billion.