WASHINGTON -Total net tax-supported debt fell for the first time in 28 years in 2014, a Moody's report released Wednesday found.
The report attributed the debt decrease to states' reluctance to take on new debt given tight operating budgets, slow economic recovery and uncertainty over federal policy and health care funding.
The overall NTSD in 2014 fell $6.2 billion to $509.6 billion, $5.3 billion of which was because Moody's reclassified someTexas general obligation mobility fund debt as self-supporting. Even without the reclassification though, the absolute debt level fell about $900 million.
Thirty-one states saw a decrease in absolute debt in 2014, with New York and California leading the list. Illinois and New Jersey, which each pursued transportation and other projects in 2014, led among the states that saw the largest debt increases.
Comparisons of key debt ratios in 2014 also indicated aneasing of debt pressure for states, as the report showed a decrease in debt alongside increases in both population and per capita income. The study found debt per capita fell for the third year in a row and debt as a percent of personal income fell for the second straight year, with median average decreases of $1,012 and 2.5%, respectively.
The 2014 debt was made up primarily of general obligation debt, but the amount of NTSD from GO bonds varied considerably on the state level, the report found. Some states relied heavily on GO bonds. They made up more than 94% of Vermont's NTSD. Other states, which may primarily rely on lease revenue, appropriation-backed or special-tax debt, have constitutional provisions that prohibit or severely limit GO bonds. Eleven states did not rely on GO bonds at all.
Moody's sees the country's NTSD in 2015 being similar to 2014, with either no change or another decrease.
"Most states will continue to avoid major new debt service commitments in the face of moderate revenue growth and continuing pressure for increased education and health care spending," the report said. "Few states have announced large new borrowing initiatives. While many states are also grappling with funding large pension liabilities, we expect that states' use of pension obligation bonds (POBs) will remain limited."
However, the ratings agency said it sees debt rising in the future as states address infrastructure needs that cannot be funded by "stagnant" federal transportation aid.
