DALLAS – With much of the nation facing an “old-age” crisis with implications for fiscal sustainability, Texas stands out as the state with the strongest demographic trend lines, according to a report Tuesday from S&P Global Ratings.
“Texas continues to boast strong demographic trends, ranking first in population growth from 2010 to 2017 and second in growth of both prime working-age adults and those under 20,” according to the report authored by analysts Timothy Little and Gabriel Petek. “Although this creates budgetary stress, particularly related to school funding and infrastructure demands, it also generates organic economic growth.”
Texas’ population grew by 4.3 million between 2000 and 2010 to 25 million, representing the highest population increase by number of people for any state, according to census data. The median age is 34.2, almost four years younger than the U.S. average of 38. Nearly 17% of the population is foreign born, and immigrants from Asia have overtaken those from Latin America, according to the state demographer.
The S&P report follows similar findings from Fitch Ratings and Moody’s Investors Service raising concerns about the nation’s aging population as the U.S. Census Bureau prepares for the 2020 headcount.
For state and local governments that must pledge their full faith and credit over periods of three or four decades, anticipating population trends is an important factor to consider, analysts noted. To maintain debt service, an issuer might have to increase taxes on a dwindling or elderly population, which, in turn, can exacerbate the downward cycle.
In its survey for the years 2010-17, S&P found that states with high overall population growth and a high proportion of adults aged 25 to 54, the prime working ages, were more likely to have stronger economic growth.
“We also observed particular regions of the country having more ability to attract prime working-age adults than others, which has proven economically beneficial,” analysts said. “However, nearly all states experienced declines in the proportion of their population both under 20 and from 25-54, while the proportion of those 65 and older increased.”
The median age of the U.S. increased to 38 from 37.2 from 2010-2017. By 2030, all baby boomers will be older than 65, and the size of the older population will be such that one in every five residents will be of retirement age. The Census Bureau estimates that the median age will increase to 43 by 2060.
“Despite a 5.5% increase in the national population over this period, those of retirement age increased while the share of younger people shrank,” analysts wrote. “To us, we consider the looming major demographic shift the bigger risk because the U.S. will have fewer prime working-age adults compared to those of retirement age.”
Based on median age, New England is the oldest region of country with five out of the six states in the region among the oldest 10 in the U.S. Massachusetts, rated AA with a stable outlook by S&P, is the exception because of its strong attraction of younger individuals to the Boston area.
Maine is the oldest state with a median age of 44.7 and is the 44th-fastest growing in the U.S.
The coastal South Atlantic has shown positive demographic changes, analysts said, with triple-A-rated Florida, Georgia and North Carolina ranked among the top 15 states for population growth and working-age adults, along with AA-plus-rated South Carolina.
States in the heart of the Appalachian region saw a more negative trend than growing Washington, D.C., and its suburbs and urban areas in Maryland and Virginia. West Virginia ranked worst in some key areas in S&P’s assessment, with population declining 2%, an 8.9% drop in working age adults and a median age that is the fourth-highest in the nation.
In the Midwest, Illinois, rated BBB-minus with a stable outlook, and North Dakota, AA-plus with a stable outlook, are a study in contrasts. While Illinois population contracted slightly, making it the third-slowest growing state, North Dakota’s 12.3% population boom made it the second-fastest growing.
The West has notched the greatest gain in prime working-age adults, with seven states ranking in the top 10 and California, rated AA-minus/stable, at No. 11.
California’s well-educated workforce and burgeoning high-technology, biotechnology, and alternative energy sectors continue to propel the Golden State’s economy, analysts said.
Like Florida, Arizona, rated AA/stable, is a mecca for retirees but continues to attract working-age adults, as does Florida. Colorado, rated AA/stable, another fast-growing state, continues to prosper with its mix of energy and high-tech economies and a lifestyle that appeals to health-conscious, working-age adults, analysts said.
