Which US States Have the Lowest Debt Burden? A Deep Dive Into America's Fiscal Health

When we talk about personal financial struggles, student loans and credit card debt often dominate the conversation. But what about states themselves? Just like individuals, entire states face significant debt challenges—and some manage their finances far better than others. A comprehensive analysis of state financial reports reveals striking differences in fiscal health across America, with several states standing out as financial champions while others face mounting burdens.

Understanding State Debt: How It’s Measured

To properly evaluate state financial standing, we need to look beyond surface-level numbers. The analysis examines three critical metrics: total liabilities (what states owe), total assets (what they possess), and the debt ratio—calculated by dividing liabilities by assets. When a debt ratio exceeds 100%, a state owes more than it has in reserves, signaling potential financial stress.

Using the most recent Annual Comprehensive Financial Reports (ACFRs) from state governments—primarily 2022 data—we can paint a clear picture of which states operate with healthy balance sheets and which ones are stretched thin.

The Financial Champions: States with No Debt Concerns

Several American states demonstrate remarkable fiscal discipline. Idaho leads the pack with the healthiest balance sheet, maintaining a debt ratio of just 10.68%. With total liabilities of $4.43 billion against assets of $24.25 billion, Idaho represents the gold standard for state fiscal management.

Following closely, Alaska maintains a 14.68% debt ratio, with $12.99 billion in liabilities balanced against $104.68 billion in assets. Utah rounds out the top three with a 15.93% debt ratio ($6.45 billion liabilities to $46.13 billion assets).

These states with minimal debt burdens share common characteristics: smaller populations, prudent spending policies, and healthy asset reserves. The pattern continues with Nebraska (22.99%), South Dakota (23.88%), and New Hampshire (24.64%)—all maintaining debt ratios below 25%.

North Dakota, Oklahoma, Iowa, and New Mexico form another tier of fiscally responsible states, with debt ratios ranging from 26% to 30%. North Carolina sits at 30.95%, while Montana (33.28%), Wyoming (33.81%), and Arkansas (35.79%) complete this group of relatively low-debt states.

The Middle Ground: States Managing Moderate Debt

As we move up the debt spectrum, we encounter states like Florida (35.98%) and Arizona (37.88%), which maintain reasonable but slightly elevated debt ratios. Alabama, Kansas, South Carolina, Mississippi, and Indiana occupy the 37% to 43% range—still healthy by most measures but showing signs of fiscal pressure.

Minnesota, Missouri, Tennessee, and Oregon sit in the 44% to 48% range, representing states where debt is becoming more prominent relative to assets. Wisconsin (48.12%) and West Virginia (48.96%) cross the 48% threshold, entering territory where debt management becomes increasingly important.

The Warning Zone: States Approaching Financial Strain

Several significant states show concerning trends. Virginia (50.16%), Georgia (53.76%), and Massachusetts (56.31%) all exceed 50% debt ratios. Nevada (56.51%), Michigan (56.65%), and Ohio (57.65%) continue this pattern, while Texas—the nation’s second-largest state—carries a 59.39% debt ratio despite substantial assets totaling $475.45 billion.

Colorado (65.56%) pushes past the two-thirds mark, and Washington (77.52%) shows increasing fiscal pressure with liabilities of $94.85 billion against assets of $133.31 billion.

The Critical Zone: States with Severe Debt Burdens

Several states operate well above the 80% debt ratio threshold. Maine (81.02%), Louisiana (81.36%), Pennsylvania (84.07%), and Rhode Island (86.22%) show significant fiscal challenges.

Vermont (93.67%) and Kentucky (94.95%) approach the critical 100% mark, while Maryland (96.63%) and Delaware (99.08%) practically stand at the brink. These states have liabilities nearly equal to their total assets, leaving minimal fiscal cushion for emergencies or unexpected expenses.

The Critical Alert: Debt Exceeding Assets

Most troubling are states where total liabilities exceed total assets—debt ratios surpassing 100%. Hawaii leads this unfortunate group with a 107.31% ratio, owing $28.25 billion against only $28.08 billion in assets. California, despite its enormous asset base of $491.46 billion, carries $480.81 billion in liabilities, resulting in a 111.04% debt ratio.

Connecticut presents a stark case with a 172.44% ratio ($97.47 billion in liabilities versus $48.11 billion in assets). New York faces even more severe stress with a 218.12% ratio—$304.34 billion in liabilities to just $144.97 billion in assets.

New Jersey represents the worst fiscal position, carrying a staggering 249.64% debt ratio with $224.57 billion in liabilities against only $75.79 billion in assets. Illinois tops the list with a dire 295.58% ratio, representing the most challenging state debt situation in America.

What This Means for Residents and the Economy

The disparity between states with manageable debt—particularly those states with no debt concerns in the 10-25% range—and those facing crisis-level obligations raises important questions about public services, infrastructure investment, and tax policy.

States maintaining low debt ratios have greater flexibility to invest in education, infrastructure, and economic development. Conversely, states drowning in debt face limited options and may struggle to provide essential services or respond to fiscal emergencies.

The analysis underscores that fiscal health varies dramatically across America, with some states demonstrating exemplary financial stewardship while others face mounting structural challenges requiring serious policy intervention and difficult choices about spending priorities and revenue generation.