It’s fitting that following the blogs on the best state tax environments, top job growth and Q1 to Q2 2017 GDP changes, to now write about the states with enormous debt burdens (and those that are the best, also). As I’ve always said, it’s not the amount of the debt that exists that counts, but rather, does the borrower have adequate cash flow to make the necessary payments.
Which states are the most debt burdened based on the ratio of their assets to liabilities? To answer this, howmuch.net used data from GoBankingRates.com to calculate each state’s debt as a percentage of the state’s government assets (balance sheet analysis). In addition to their findings, also added are each state’s population as of 2016 with the respective state debt per person calculated. Following are the ten states with the greatest Debt to Assets ratio based on the state government’s balance sheet. To show the extent of New Jersey’s Debt to Asset extreme, at 314.1 percent it is 23.3 times greater than Alaska’s Debt to Asset ratio of 13.5 percent.
The next table shows the 10 states with the lowest Debt to Asset ratios.
Earlier I had noted that it is not the amount of debt that counts, but rather the cash flow available to make the required debt service payments. Alaska, for example, has $14,288 debt per resident, but the Alaskan Permanent Fund has a $62.4 billion balance, or a total of slightly more than $84,100 per person. Thus their debt at this stage is meaningless as long as required payments to fund the government and future pensions are accessible.
To view the howmuch.net summary of this ratio for all 50 states click https://howmuch.net/sources/the-united-states-of-debt
To read the original GoBankingRates.com article click https://www.gobankingrates.com/making-money/states-least-amount-debt/
No doubt states with high Debt to Asset ratios face a combination of increased taxes in the future and/or cutting of benefits and services – both an unattractive picture for residents but opportunities for other low debt-to-asset states.
Reply back if you have any questions or comments.