Austerity Lingers as States Remain Debt Averse Despite Low Rates
(Bloomberg) -- U.S. states still have plenty of room to run up their debts. Or at least most of them do.
States’ tax-supported debt rose just 1.2 percent to $522 billion in 2017, the fifth straight year of growth below 2 percent, according to a report by Moody’s Investors Service. The reticence to borrow persisted despite anticipation that the Federal Reserve would continue to raise interest rates, giving them a strong incentive to capture low interest rates while they still could to finance roads, bridges and other public works.
The average net-tax supported debt among states was $1,477 per capita, with 31 states under that figure, according to the report. Connecticut had the highest in net tax-supported debt per capita at $6,544. Nebraska had the lowest -- just $20.
While most states exercised fiscal restraint, Illinois, the lowest rated U.S. state, bucked the trend last year by increasing its debt 16 percent, Moody’s said. That wasn’t because it was investing in infrastructure, though: Illinois sold $6 billion in bonds to pay off a backlog of bills left from a long-running standoff over the budget. That boosted Illinois’ net tax-supported debt per-capita to $2,919, the sixth highest in the country.
Moody’s analysts led by Joshua Grundleger said they don’t expect much of a change in the penny-pinching posture anytime soon.
©2018 Bloomberg L.P.