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April 18, 2024

Indiana has very little bond debt according to new study

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A new analysis released this week by the American Legislative Exchange Council shows Indiana has comparatively little bond debt compared to the other 49 states.

The Hoosier State is second in per capita bond debt, at $200 per person. Only Wyoming, at $67, is lower.

Total state bond debt for all 50 states exceeds $1.25 trillion, or $3,800 per person. Just 10 states — California, New York, Texas, Illinois, Massachusetts, New Jersey, Ohio, Washington, Connecticut and Virginia — account for 64 %, some $809 billion, of the total.

Indiana’s total bond obligation stands at nearly $1.4 billion, which is the fourth lowest in the country.

Indiana is also tied for first with 10 other states — Arizona, Colorado, Idaho, Iowa, Kansas, Kentucky, North Dakota, South Dakota and Wyoming — having zero general obligation bond debt.

General obligation bonds are backed by the full faith and credit of the state, meaning states cannot default on such debt. That also means that general obligation bonds are the most secure type issued.

Such bonds account for a little more than $463 billion nationwide, or nearly 37% of all state obligations.

As for governmental activity bonds, revenue bonds used to fund capital projects, Indiana is one of eight states — along with Arkansas, Colorado, Nebraska New Hampshire, Oklahoma, Pennsylvania and Tennessee — with no debt.

Business-type activity bonds are issued by state agencies that are basically self-supporting, such as a university or a toll road. Indiana is tied for first at $0 along with Delaware, Kentucky, Nebraska, Mississippi, Montana, Nebraska, Ohio, Tennessee, Utah, Vermont, West Virginia and Wyoming.

All of Indiana’s bond debt comes in the form of component unit bond liabilities. Component units are entities created by a state government that are legally separate and can go bankrupt.

As the authors explain, Indiana and its neighbor Illinois represent two ends of the scale when it comes to bond debt, primarily due to Indiana’s constitutional limit on debt. Illinois, which has issued debt in every type of bond category, lacks such a limit and has the worst credit rating of any state, having been downgraded 22 times since 2009. Indiana’s credit rating is among the best.

While Indiana as the fourth lowest total bond debt, Illinois is fourth highest at more than $76 billion. Illinois also has the 10th highest per capita bond debt at $6,025.

Both states, however, report they plan to pay most of the debt service owed on current bonds within the next decade.

This article was originally posted on Indiana has very little bond debt according to new study

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