World Economy

US Debt Remains Suppressed

US Debt Remains SuppressedUS Debt Remains Suppressed

The outstanding amount of US states’ debt backed by tax revenue was little changed in 2015 compared to the prior year, despite historically low interest rates and increased tax collections, a survey released on Friday showed.

The level of net tax-supported debt rose a minimal 0.6% to $512.5 billion through 2015, according to data compiled by Moody’s Investors Service. That is below a peak of $516 billion reported in 2013 from data collected in the prior year, Reuters reported.

Debt levels will likely remain suppressed for the remainder of the current year because of volatile commodity markets, weakness in the revenues of states supported by the sale of oil and gas and “longer term trends of continued uncertainty over federal fiscal policy and healthcare funding,” the report said.

After the 2008 recession hammered revenue collections and tightened government budgets, many states took a more austere approach toward expenses and long-term liabilities.

Analysts in the $3.7 trillion US municipal bond market have said that an austerity mindset is a big reason why new-debt issuance has been low, despite the need to spend on a backlog of infrastructure projects.

Though 34 states had declining debt levels, two had double-digit increases: Kansas and South Dakota, at 40% and 20%, respectively. For Kansas, the increase was driven largely by its issuance of $1 billion of pension obligation bonds, Moody’s said.

States with the largest year-over-year debt level declines were Nebraska and North Dakota, each with a 15% drop, and Utah, which saw its debt decrease 12%.

States with the highest per capita debt levels were unchanged from the prior year: Connecticut, Massachusetts, Hawaii, New Jersey and New York, in that order.

At 52%, general obligation bonds continue to make up the biggest share of states’ debt portfolios. Appropriation and lease revenue comprise the second biggest portion at 21%, Moody’s found.

Moody’s has also downgraded Auburn, NY’s GOLT rating to A2 from A1. “Concurrently, we have assigned an A2 to the city’s $4.5 million Public Improvement Refunding (Serial) Bonds, 2016 and to its $3.8 million Public Improvement (Serial) Bonds, 2016,” it said.

The downgrade to A2 reflects an adequate financial position pressured by a sustained heavy debt burden with elevated fixed costs. The rating also reflects a modest tax base characterized by below-average income levels and high poverty.


Thirty-four states have declining debt levels.