The total debt by US States has steadily increased over the years. The debts, also referred to as unpaid borrowed funds differ from state to state. Spending data from official government sources indicate that the debts include an amount to cover budget gaps, unfunded pension commitments, and outstanding bonds. Borrowing is further done to finance education, defense, health care, and welfare expenses among other government spending allocations. However, the amount that can be borrowed is limited by the United States Debt ceiling.
In general, debts in states increases as a result of spending habits or a decrease in income from taxes and other income sources. Historically public debts as a share of the gross domestic product have increased in times of recession and wars but subsequently declined. Although debt per capita is dependent on debt levels and total population, states that are highly indebted have a comparatively higher debt per capita. States are tasked to apply macroeconomic management operations to reduce debts.
States With the Highest Debt Amount
California is the most indebted state with an outstanding debt of $152.80 billion during the 2019 fiscal year. New York comes second with an outstanding debt of $139.20 billion. Although the two states have a high Gross State Product of $3091.2 billion and $ 1738.4 billion respectively, making them the richest states, their burden of debts is enormous. The two states require huge amounts to reimburse the debts each year, a factor that has dwarfed development.
Massachusetts is ranked third with a debt of $77.0 billion followed closely by New Jersey with an outstanding debt of $65.90 billion. Illinois is ranked fifth with an outstanding debt of $61.80 billion. Texas, Pennsylvania, and Connecticut follow each other with a debt of $51.0 billion, $47.5 billion and $38.8 billion respectively. The States of Michigan, Ohio, and Washington have debts of $33.5 billion each.
However, it is worth noting that there are states with relatively very little outstanding debts. The bottom on the list is Wyoming with owing only $ 0.8 billion. Nebraska, Montana and North Dakota have a debt of $2.0 billion, $2.80 billion and $2.90 billion. The other states ranked low in terms of the debt are Nevada, Idaho, Vermont, and South Dakota. These states are also among the least populated states in the country.
Impact of Debts
A debt is an accumulated federal budget deficit that has adverse consequences both at the local and national level. It is worth noting that high debt levels lead to higher interest repayments cost which is a cost passed down to future taxpayers. High debts leave minimum funds for vital government programs. Finally, growing debts have a real and direct impact on investment opportunities available to Americans.