States With The Most And Least Debt In 2020

The year 2020 has not been a kind one for budgets. Whether it’s spending more than ever to stay alive or cutting costs to stay afloat, everyone’s been feeling the pressure, especially state governments. Fortunately, most states are in the black in terms of their finances, at least according to their latest comprehensive annual financial reports (CAFR), covering the fiscal year July 1, 2018 to June 30, 2019. There are, however, several states whose budgets went into this year’s pandemic crisis already in poor shape.

We analyzed every U.S. state’s most recent CAFR to determine how much debt it was carrying, based total assets, total liabilities, deferred outflows of resources and deferred inflows of resources. Deferrals are not assets or liabilities. They also are not revenues or expenses. While revenues are inflows of resources and expenses outflows of resources, they are related to the period in which they occur. Deferred inflows of resources and deferred outflows of resources are related to some period in the future. A state’s net position is calculated by total assets and deferred outflows minus total liabilities and deferred inflows.

Read on to find out which states have the most debt and which states have the least in 2020.

States With the Most Debt in 2020

Looking at states in terms of their debt ratio — total liabilities to total assets — the state with the most debt has almost five times as much debt as assets — $248.67 billion in liabilities to $53.05 billion in assets. There are 13 states whose net positions are negative, meaning, they have more total liabilities and deferred inflows of resources than they do total assets and deferred outflows of resources. In absolute numbers, California is the states with the most debt with $362.87 billion in total liabilities in 2019. However, with total assets worth $301.1 billion, California’s net position is better than some states with less debt.

Since there are 13 states with negative net positions, here’s a list of the 13 states with the most debt in terms of their debt ratio:

In absolute terms, New York has the worst net position, being $203.77 billion in the red. With total assets worth about $106.61 billion, New York’s debt ratio is actually lower than many states with better net positions.

A big source of debt in Illinois are pension obligations. According to its state’s CAFR, Illinois’s net pension liability totaled $138.59 billion. Related to pension obligations are other postemployment benefits (OPEB), including health, dental, vision and life insurance policies for state and university retirees. Illinois’s OPEB liability for the fiscal year 2019 totaled $54.52 billion. Indeed, OPEB liabilities are a significant issue for all indebted states. New York state’s net OPEB liability totaled $107.79 billion in 2019, which accounts for more than a third of the state’s nearly $292 billion in total liabilities.

Liabilities from pension obligations are also a major source of debt in New Jersey, the No. 2 state with the most debt. Interestingly, according to New Jersey’s CAFR, the primary reason for the state’s enormous debt is due to changes made by the Government Accounting Standards Board (GASB) in regards to how pension plan data is reported and measured. Two new standards adopted, GASB 67 and GASB 68, were aimed at greater transparency and accuracy, the latter of which required states like New Jersey to start reporting their unfunded pension liabilities on their CAFR balance sheet. With these changes implemented in 2015 plus the implementation of GASB 75 in 2018, which set new standards for reporting OPEB other than pensions, New Jersey’s financial position assumed its current negative position. These GASB accounting changes have been often cited as the explanation for deficits by many states in their CAFRs.

States With the Least Debt in 2020

The states with the least amount of debt are an interesting mix of states geographically. Mountain states, such as Idaho, Montana, Utah and Wyoming made the top-10 list, as did upper Midwest states like Nebraska, North Dakota and South Dakota. Alaska takes the No. 1 spot, with a tiny debt ratio of only 14.2%. Its total liabilities amount to only $12.65 billion compared to total assets of approximately $89.17 billion in 2019.

Here’s a breakdown of the top-10 states with the least amount of debt in 2020:

Many of the states with the least amount of debt have much smaller populations than other U.S. states. Plentiful natural resources, especially mineral resources, is another theme. Having smaller populations typically means smaller bureaucracies and state employees, whose retirement benefits often become the biggest obligations facing state budgets.

Below you’ll find a table with the full breakdown of all 50 states, their total assets, liabilities, deferred outflows and inflows, net position and debt ratio. You can rank the table by any of the individual factors as well. States are ranked from 1 to 50, 1 being the state with the most debt and 50 the least debt.