Massachusetts’ strong economy has helped the state sustain some of the highest debt levels and unfunded pension liabilities in the nation, said Moody's Investors Service.

The situation, though, may deteriorate as an aging workforce and modest population growth could prompt tough budget decisions.

“Massachusetts' economy is strong, but a slowdown may be on the horizon,” wrote Moody's vice president Genevieve Nolan. Some declines, she said, are already starting to show, with gross domestic product growth slowing to 1.6% in the first quarter of 2018, below the national rate of 2.3%.

The commonwealth last week sold $343.6 million of general obligation bonds. It has also scheduled a $250 million negotiated offering of commonwealth transportation fund bonds for June.

Moody's rates Massachusetts' general obligation bonds Aa1, while Fitch Ratings and S&P Global Ratings assign AA-plus and AA ratings respectively, All three assign stable outlooks.

The Moody's report pegs Massachusetts' debt and pension liabilities as the sixth-highest among the states as a percentage of gross domestic project. The combined state and local government debt burden is more moderate. Moody’s calculates Massachusetts’ adjusted net pension liability for fiscal 2016 at $65.2 billion, or 201.5% of its revenues.

Borrowing on behalf of other government concerns such as schools and mass transit -- which combine for roughly 25% of the state's outstanding debt -- has helped to drive up the commonwealth's liabilities. Many other states handle this borrowing at the local level.

"When factoring in debt issued by local governments, as reported by the U.S. census, Massachusetts' leverage is more moderate," said Moody's.

State pension funding has been lower than levels needed, said Moody's, to keep liabilities from escalating.

The House of Representatives and Senate are debating their versions of the fiscal 2019 budget, which for now are fractionally different at around $41 billion. After each chamber approves a spending plan, a concurrence panel will recommend a version to send to Gov. Charlie Baker.

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