State Budgets

State Budget Solutions’ Fourth Annual State Debt Report

State Budget Solutions’ (SBS) fourth annual State Debt Study reveals that state governments face a combined $5.1 trillion in debt. This total equals roughly $16,178 per capita, or 33 percent of annual gross state product. Another telling way to view the problem – state debt is equal to 469% of all fiscal year state general and other fund expenditures.

Since 2010, SBS has conducted a comprehensive examination of debt facing the 50 state governments. These reports have repeatedly found trillions in combined debt that stand in stark contrast to officials’ proclamations of balanced budgets and belt-tightening. This year’s update, and those in the past, show unfunded public pension liabilities’ incredible contribution to state debt. In fact, these liabilities make up 79 percent of all state debt.

SBS’ unique and comprehensive approach to calculating state debt includes four separate components. The components are market-valued unfunded public pension liabilities, outstanding government debt, unfunded other post employment benefit (OPEB) liabilities, and outstanding unemployment trust fund loans. Together, these four factors present an all-inclusive view of state obligations not conventionally presented but that both lawmakers and taxpayers nonetheless must confront.

The table below shows each state’s total debt, along with details breaking down that debt into its four contributing components. Per capita details and state rankings can be found in tabs along the bottom. Click here to view the spreadsheet in a separate page.

California leads the pack with $778 billion in state debt, mostly as a result of the state’s $584 billion unfunded public pension liability.  New York ($388 billion), Texas ($341 billion), Illinois ($321 billion), and Ohio ($321 billion) round out the top 5 states with the largest amounts of state debt. While each figure is staggering in its own right, this perspective does seem to highlight those states with the largest populations.

A more alarming fiscal situation is revealed when state debt totals are broken down according to a series of factors that reflect the toll that eventually reducing that debt may take on citizens, the local economy, and state budgets.

The first way to break down the data is by look at the debt on a per capita basis. Using the United States Census Bureau’s 2012 population estimates, the study reveals that combined, state debt is equal to $16,178 for every resident of a U.S. state. That figure does not adequately portray the dire situation in some states, though.

In terms of per capita, Alaska’s state debt is equal to $40,714 per person, followed by Hawaii ($33,111), Connecticut ($31,298), Ohio ($27,836), and Illinois ($24,959).

Top 5 State Debt Per Capita Bottom 5 State Debt Per Capita
Alaska $40,714 Tennessee $6,358
Hawaii $33,111 Indiana $7,094
Connecticut $31,298 Wisconsin $7,863
Ohio $27,836 South Dakota $9,249
Illinois $24,959 Arizona $9,321


State debt as a percentage of gross state product is another possible measure. Across the spectrum of states, this figure varies widely. Hawaii (64 percent), Ohio (63 percent), New Mexico (62 percent), Alaska (57 percent), and Mississippi (54 percent) all face a state debt that totals more than 50 percent of their entire 2012 gross state product.

Top 5 State Debt as a Percentage of Gross State Product Bottom 5 State Debt as a Percentage of Gross State Product
Hawaii 64% Nebraska 13%
Ohio 63% Tennessee 15%
New Mexico 62% Indiana 16%
Alaska 57% Wisconsin 17%
Mississippi 54% South Dakota 18%


Over time, state debt will exact a toll on state budgets. Money once expected to fund vital services like education and healthcare will have to be redirected to debt service, increased contributions to public pension systems, and more. Based on this, it is illustrative to examine state debt as it relates to state expenditures.

The National Association of State Budget Officers’ annual State Expenditure Report compiles total state expenditures. Excluding bonds and federal funds from fiscal year 2012 expenditures in order to focus on state resources, total state debt is equal to 469 percent of state spending.

Nevada stands out with a state debt equal to 1,048 percent of its own spending. It is followed, albeit not too closely, by Ohio (742 percent), Illinois (727 percent), California (647 percent), and Georgia (633 percent).

Top 5 State Debt as a Percentage of FY2012 Spending Bottom 5 State Debt as a Percentage of FY2012 Spending
Nevada 1,048% West Virginia 141%
Ohio 742% Wisconsin 146%
Illinois 727% Nebraska 191%
California 647% Wyoming 222%
Georgia 633% North Dakota 224%


Components of Debt

SBS calculates state debt by combining four separate components. This approach marks a slight adjustment from previous years’ reports, which also included projected fiscal year budget gaps. Due to a lack of surveyed data, this figure was not factored into the current report.

Components of State Debt (thousands)
Unfunded Public Pension Liabilities $3,900,823,389
Outstanding Debt $618,832,092
Unfunded OPEB Liabilities $528,787,000
Unemployment Trust Fund Loans $19,921,682
Total $5,068,364,163


Unfunded public pension liabilities

The largest single amount of the states’ combined $5.07 trillion in debt comes from unfunded public pension liabilities. These total over $3.9 trillion. The following table shows the 5 states with the largest total and per capita public pension unfunded liabilities.

Top 5 Unfunded Pension Liability (thousands) Top 5 Unfunded Pension Liability Per Capita
California $583,627,395 Alaska $32,454
Ohio $287,373,800 Ohio $24,893
New York $260,075,662 Connecticut $20,726
Illinois $254,872,560 New Mexico $20,517
Texas $244,164,239 Illinois $19,796


SBS’ calculation of over $3.9 trillion in unfunded public pension liabilities is based on data originally published in September 2013 in the report “Promises Made, Promises Broken – The Betrayal of Pensioners and Taxpayers,” which relied on the most recent actuarial data available from over 250 state-administered defined benefit pension plans. That report took a market-valued approach to calculate plan funded levels by discounting liabilities according to a risk free rate. This approach reflects the nearly risk-free nature of public pension benefits. That is, once promised, the risk that they will not have to be paid is quite low.

The State Debt Report’s examination of unfunded public pension liabilities includes over $2.46 trillion in plan assets. Based on state-reported liabilities, the total funded ratio of these plans was 73 percent. However, discounting plan liabilities according to a risk-free rate of 3.225 percent, based on the 15 year Treasury yield reveals a funded ratio of just 39 percent and $3.9 trillion in unfunded obligations.

SBS has slightly modified the list of included pension plans in the State Debt Report to ensure that the plans are at least partially attributable to state government. To that end, included plans were based on Loop Capital Markets’ “Eleventh Annual Public Pension Funding Review.”

Outstanding Debt

This component is made up of bonds, leases, and other traditional aspects of government debt as listed in each states’ comprehensive annual financial report. This year’s report, which used figures from the latest available CAFR, shows a combined $620 billion in debt. That represents an increase of roughly $13 billion over the previous year’s report. The following table shows the 5 states with the largest total and per capita outstanding debt.

Top 5 Outstanding Debt (thousands) Top 5 Outstanding Debt Per Capita
California $199,680,625 Connecticut $5,246
New York $58,060,000 Hawaii $5,346
New Jersey $41,433,010 New Jersey $4,674
Texas $41,344,000 Massachusetts $3,816
Illinois $33,186,555 Washington $3,150


Unfunded Other Post Employment Benefit Liabilities

Like unfunded pension liabilities, unfunded OPEB liabilities (mainly retiree healthcare benefits) are a threat to state finances driven by a combination of promises made to an aging public employee workforce and the states’ failure to properly fund those promises. The State Debt Report includes $529 billion in unfunded OPEB liabilities as reported by Standard & Poor’s Ratings Services (S&P) in a 2013 report “U.S. State OPEB Liabilities Decline Slightly, But Vary Widely.” The following table shows the 5 states with the largest total and per capita OPEB unfunded liabilities.

Top 5 Unfunded OPEB Liability (thousands) Top 5 Unfunded OPEB Liability Per Capita
New York $66,479,000 Hawaii $8,408
California $65,210,000 New Jersey $7,206
New Jersey $63,881,000 Delaware $6,152
Texas $55,436,000 Alaska $5,533
Illinois $33,295,000 Connecticut $4,987


While S&P’s report did find a 2 percent decrease in unfunded liabilities, it remains both revealing and distressing that, according to their research, only Indiana, Utah, and Rhode Island made their full actuarially determined OPEB contributions in fiscal year 2012. Further, only seven states currently have an OPEB trust funded beyond 20 percent of liabilities.

Outstanding Unemployment Trust Fund Loans

According to the National Conference of State Legislatures (NCSL), “The Federal Unemployment Account (FUA) provides for a loan fund for state unemployment programs to ensure a continued flow of benefits during times of economic downturn.” This fund was tapped frequently and by many states during the recent economic crisis. NCSL’s reporting, based on Department of Labor data, showed that 14 states had outstanding unemployment trust fund loans as of December 3, 2013.

Top 5 Outstanding Unemployment Trust Fund Loans (thousands) Top 5 Outstanding Unemployment Trust Fund Loans Per Capita
California $9,400,383 California $247
New York $2,851,005 Indiana $206
North Carolina $1,894,163 North Carolina $194
Ohio $1,552,419 Connecticut $160
Indiana $1,343,674 New York $146

State Budget Solutions’ Fourth Annual State Debt report shows staggering and growing levels of state debt. These figures should serve as a wake up call for citizens and policymakers alike.


Outstanding unemployment trust fund loans were obtained from the National of Conference of State Legislatures as of December 3, 2013. Outstanding debt figures were compiled based on figures from each state’s respective fiscal year 2012 comprehensive annual financial report. Unfunded other post employment benefit liabilities are based on figures from Standard & Poor’s 2013 report “U.S. State OPEB Liabilities Decline Slightly, But Vary Widely.” Unfunded public pension liabilities are based on data originally reported in State Budget Solutions’ “Promises Made, Promises Broken – The Betrayal of Pensioners and Taxpayers,” although modified to include those pension plans listed in Loop Capital Markets’ “Eleventh Annual Public Pension Funding Review.” Total population figures were obtained from the United States Census Bureau’s 2012 Population Estimates, and Gross State Product figures are from the Bureau of Economic Analysis’ regional economic index for the year 2012. State expenditure figures are based on those listed in National Association of State Budget Officers’ “State Expenditure Report,” and include actual expenditures from state general and other funds for fiscal year 2012.

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