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Consumer debt—including credit card balances and auto loans—has ballooned in 2023, and state budgets have been impacted too. When a state owes more than it brings in, its residents may face financial insecurity due to budget cuts and tax increases. Consumers may also have high costs of living and outsized debt-to-income ratios to contend with.
Forbes Advisor explored the country’s debt burden by looking at how household and government debt compares across U.S. states.
Key Takeaways
- Hawaii is the most indebted state, with government debt at $13,681.67 per capita. The total state debt balance of $19.7 billion represents 19.49% of the state’s GDP.
- Colorado recorded the highest household debt per capita, with a sum of $89,170, which constitutes 99.85% of the average annual earnings of a Colorado resident.
- Idaho has the lowest per capita government debt in the nation, at $3,107.52, which accounts for 5.43% of the state’s total GDP.
- Wyoming holds the smallest state debt as a percentage of GDP, at just 4.11%.
Top 5 States With the Most Debt
1. Hawaii: The Most Indebted State
Score: 100 out of 100
The state ranks third-highest for household debt per capita, with the average resident carrying a debt of $82,650
To provide context, this debt load is a considerable financial strain, constituting 89.39% of the median income,
Hawaii scored 100 out of 100 in our study due to multiple factors, including government debt and individual debt relative to the state’s gross domestic product (GDP) and household income.
The Aloha State ranks third-highest in debt per capita, with the average resident carrying $82,650 in debt. That’s equal to 89.39% of the median household income, resulting in the state ranking fifth-highest in this metric. And Hawaii’s $19.7 billion in government debt breaks down to $13,681.67 per capita, which is 19.49% of the state’s GDP.
2. California
Score: 96.51 out of 100
California has the second-highest household debt balance and fourth-highest government debt balance across all states. This places the Golden State second on our list of the most indebted states.
California’s government and household debts stand at $13,867.55 and $84,730 per capita, which amounts to 14.86% of the state’s GDP and 92.55% of the median household income, respectively. The nation’s most populous state is also among the worst states for saving money.
3. Colorado
Score: 94.19 out of 100
Coming in as the third most indebted, Colorado’s government holds $11,940.00 in debt per capita. While this is relatively low compared to other states, Colorado’s debt represents 14.20% of the GDP, putting the state at the 11th-worst rank for that metric.
Residents of Colorado have the highest average debt by state at $89,170 per household. When comparing this figure to median annual income, it’s equivalent to 99.85% of a typical Colorado salary.
4. Oregon
Score: 88.37 out of 100
Oregonians have the seventh-highest household debt in the nation. The average Oregon household owes $66,950, which is equivalent to 88.49% of the median household income.
The total government debt of $43 billion accounts for 14.59% of Oregon’s GDP, giving the Beaver State the 10th-highest rank for that metric nationwide. The state’s government debt stands at $10,232.31 per capita, which is high compared to the state’s GDP, Oregon ranks 16th-highest for state debt per capita.
5. Nevada
Score: 79.07 out of 100
Nevada is one of only seven states with no income tax, but Nevadans face some of the highest unemployment rates in the nation and carry high debt balances compared to other states.
The average household debt in Nevada is $8,800.47 per capita. In relation to the median income, the typical resident carries debt equal to 91.27% of their annual household earnings, placing the state at the third-highest rank nationwide for consumer debt by this metric.
At the state level, Nevada’s debt amounts to $8,880.47 per capita, earning it the ranking of 21st-highest state when broken down by the number of residents. Relative to the state’s economic activity, the total government debt amounts to 12.66% of GDP.
Top 5 States With the Least Debt
1. Oklahoma: Least Indebted State
Score: 0 out of 100
In addition to being one of the worst states for saving money, the Sooner State has the fourth-lowest government debt in the nation at just $4,786.67 per capita. In total, the state government’s debt accounts for 7.93% of Oklahoma’s GDP, making it fourth-lowest nationwide.
When it comes to household debt, Oklahomans carry an average of $52,900. In relation to median income, that debt is equivalent to 66.75% of total household earnings, giving Oklahoma the country’s fifth-lowest rank for that metric.
2. Iowa
Score: 4.65 out of 100
Iowa holds a government debt of $6,968.45 per capita, which accounts for 9.36% of the state’s total GDP and makes Iowa the 10th-lowest ranked nationwide.
As for household debt, Iowans carry an average of $45,720 per capita. The typical resident owes the equivalent of 65.70% of their annual earnings, which is the third-lowest household debt-to-income ratio nationwide.
3. New Hampshire
Score: 17.44 out of 100
Not only does New Hampshire have the lowest unemployment rate in the U.S., but New Hampshirites carry the 16th-highest household debt per capita. While consumer debt equates to 70.26% of household income, the state’s residents owe a comparatively low average debt balance of $63,230.
New Hampshire’s government debt is reported at $7,022.41 per capita. In total, government debt accounts for 9.33% of the state’s total GDP, making it the ninth-lowest ranked nationwide.
4. Nebraska
Score: 17.44 out of 100
Like New Hampshire, Nebraska has both a low unemployment rate and a relatively low household debt (10th-lowest). Nebraska households owe an average of $47,580, which is equivalent to 68.37% of total annual earnings.
The state of Nebraska holds the 12th-highest government debt balance at $8,157.91 per capita, but this accounts for just 9.73% of total GDP, making Nebraska the 14th-lowest state for debt as a percentage of GDP.
5. Ohio
Score: 20.93 out of 100
Ohio residents enjoy a fairly low cost of living, and they also have the sixth-lowest debt burden nationwide relative to income. While household debt is quite high at $44,210 per capita, the average resident carries debt equivalent to 67.27% of their earnings.
State debt is also on the low side for the Buckeye State. Ohio’s government debt is $8,021.68 per capita, which accounts for 11.42% of the state’s total GDP.
What Impact Does State Debt Have on Its Residents?
When states spend more money than they collect in a year, they run a budget deficit. Almost all states have balanced budget requirements (BBRs) that prohibit them from carrying deficits from one year to the next. In order to cover a deficit, a state may:
- Make budget cuts
- Tap into its rainy-day fund or budget reserves
- Increase taxes
- Borrow money or redirect funds
These measures can impact nearly every facet of life within a state. For example, budget cuts can increase the cost of living for consumers and reduce access to housing, jobs, education and other government programs and services. While government and personal debt are separate issues, a state’s debt can have negative effects on its residents—especially those also in debt.
Methodology
In order to determine the states with the most and least debt, Forbes Advisor analyzed data for all 50 states on the following four metrics:
Household Debt as a Percentage of Median Household Income: 30% of the total score
- Sources:
- Household debt comes from the Federal Reserve Bank of New York’s 2023 Household Debt and Credit Report.
- Median household income comes from the U.S. Census Bureau’s 2022 1-year American Community Survey.
Household Debt per Capita: 20% of the total score
- Sources:
- Household debt comes from the Federal Reserve Bank of New York’s 2023 Household Debt and Credit Report.
- Population data comes from the U.S. Census Bureau’s 2022 1-year American Community Survey.
Government Debt as a Percentage of Gross Domestic Product (GDP): 30% of the total score
- Sources:
- Government debt comes from the U.S. Census Bureau’s Annual Survey of State and Local Government Finances and is for Q4 2022.
- GDP comes from the Bureau of Economic Analysis and is for 2022.
- This metric shows how much state and local governments owe compared to the amount the state produces. A higher percentage means it’s tougher for the state to pay its debt, raising the risk of default and possibly leading to financial problems both domestically and internationally.
Government Debt per Capita: 20% of the total score
- Source: U.S. Census Bureau’s Annual Survey of State and Local Government Finances (Q4 2022)
