Indiana debt low relative to other states 

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By Lesley Weidenbener

Indiana's state government is carrying the country's third lowest amount of debt per capita, according to an analysis released Thursday.

The state has $5,970 of debt for each of its 6.5 million residents – significantly less than the national average of $13,754 – said State Budget Solutions, a nonpartisan think tank that aligns with conservative organizations and describes itself as "pro-reform."

In all, Indiana state government is carrying roughly $38.7 billion in debt, according to the report. That number includes not only bonds issued for projects but also loans taken by the state's unemployment trust fund and future, under-funded pension liabilities.

"It's not accidental that our debt numbers are relatively good," said State Budget Director Adam Horst. "We've taken a deliberative approach. Some of it is because Indiana has not been borrowing money to support its operating budget. And some of it is because we haven't been building new buildings."

The study also ranked states on their debt relative to the private sector labor force and private sector output. Indiana ranked among the Top 5 states in those categories as well.

John Ketzenberger, president of the Indiana Fiscal Policy Institute, said Hoosiers should view the analysis as good news.

"In the context of what we hear all the time about the federal government and the debt liabilities for the federal government, people get the notion that we're all up to our eyeballs in debt," Ketzenberger said. "This shows Indiana – on a relative basis – is doing pretty good and has managed to pretty much pay its way as it goes."

State Budget Solutions President Bob Williams said Gov. Mitch Daniels and the Indiana General Assembly should be credited with passing and managing budgets in a way that make the state less dependent on borrowing.

"It's a good state," Williams said Thursday. "Your governor has stopped the budget gimmicks and made other good budgeting decisions that show up in your lower debt."

Two of Indiana's neighbors – Illinois and Ohio – ranked among the highest debt states. Williams said that will only benefit Indiana as businesses and individuals look to escape places where higher taxes might be necessary to pay off high debt.

Williams said the goal of the analysis was to reveal the relative burden of states' debts, rather than simply looking at debt totals.

The study found that several states ranked among the bottom in multiple categories, meaning they scored the worst. Those states included Alaska, New Jersey, Hawaii, Connecticut, New Mexico, and Illinois.

Alaska had the nation's highest per-capita debt at $39,373 per person.

Nebraska ranked first in all three debt categories, meaning it was carrying the least relative debt. State Budget Solutions found it had debt of just $4,274 per resident.

States with lower debt have lower debt payments, which frees up cash for other priorities, Horst said. It also helps states achieve higher credit ratings.

"Because our debt numbers are going down, we're not committing future administrations to financial obligations," Horst said. "And indirectly it means that we have a higher credit rating and that we can borrow money cheaper when we do borrow."

Most of Indiana's debt is in three areas: Bonds for construction projects at universities, mental hospitals, prisons, state parks and other facilities; older bonds for highway construction; and the unemployment insurance loans from the federal government.

Indiana currently owes $1.9 billion that it borrowed from federal officials when the taxes paid by businesses failed to keep up with payments to unemployed Hoosiers. The General Assembly has revamped that system so the state will pay that money back over the next decade.

Williams said the state could also take steps to reduce its debt by shoring up underfunded pension liabilities.

click to enlarge STATE BUDGET SOLUTIONS
  • State Budget Solutions

Total state debt per capita rankings

Best 5 States

Nebraska ($4,274)

Tennessee ($5,553)

Indiana ($5,970)

Florida ($7,401)

Idaho ($7,625)

Worst 5 States

Alaska ($39,373)

New Jersey ($32,023)

Connecticut ($27,909)

Hawaii ($26,693)

Illinois ($21,869)

North Dakota ($19,403)

Total state debt per private sector worker rankings

Best 5 States

Nebraska ($9,787)

Tennessee ($15,861)

Indiana ($16,208)

South Dakota ($19,272)

Worst 5 States

Alaska ($102,389)

New Jersey ($85,615)

Hawaii ($77,371)

Connecticut ($71,960)

New Mexico ($61,387)

Total state debt as a percentage of gross state product for private industries rankings

Best 5 States

Nebraska (10.05%)

Indiana (15.62%)

Tennessee (15.73%)

South Dakota (18.82%)

Virginia (18.84%)

Worst 5 States

Hawaii (71.39%)

Alaska (70.03%)

New Jersey (65.06%)

New Mexico (59.19%)

Ohio (56.83%)

Lesley Stedman Weidenbener is editor at the Franklin College Statehouse News Bureau

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