State borrowing drops for the first time in 28 years

• Some still have heavy loads: Connecticut owes $5,500 per person
• Big infrastructure repair bills will require more debt down the road
• Data Visualization: See how much your state owes

Julie Jacobson | AP

The American Society of Civil Engineers estimates that some $3.6 trillion in infrastructure repairs will be needed by 2020. Above, steel girders for the new Tappan Zee Bridge is moved into position in Nyack, New York, June 17, 2015.

Like a lot of American households, state governments have begun to lighten up on credit.

For the first time in nearly 30 years, the overall level of state debt outstanding fell last year, according to the latest annual survey by Moody's, which issues credit ratings for state and local government bonds.

And the pace of new borrowing will likely continue to ease, according to the report.

"States continue to be reluctant to take on new debt with tight operating budgets, a slow economic recovery, and uncertainty over federal fiscal policy," analysts at New York-based Moody's said in the report. "We expect debt levels to remain stable or even decline again in 2015."

Overall, state taxpayers were on the hook for $509.6 billion last year, down 1.2 percent, according the survey. That's the first drop in the 28 years the survey has been conducted.

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The easing debt burden wasn't uniform, though. While the median level of tax-supported state debt fell to $1,102 per person, some states have much higher debt loads. Connecticut tops the list with nearly $5,500 in debt per person. Massachusetts, Hawaii, New Jersey and New York are in the top five, with $3,000 of debt per person in each state.

Nebraska, by contrast, has tax-supported debt of just $10 per person. (The figures don't include debt that is backed by cash flows from sources other than taxes or general revenues, such as highway tolls.)

Like many American homeowners, states and cities have also taken advantage of historically low interest rates to refinance their debts, selling new bonds that pay lower interest and using the proceeds to pay off older, higher-interest bonds.

But with most states still struggling to repair the budget damage inflicted by the Great Recession, lawmakers are still leery of adding to the total debt pile, said Moody's.

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"Most states will continue to avoid major new debt service commitments in the face of moderate revenue growth and continuing pressure for increased education and health-care spending," the report said. "Few states have announced large new borrowing initiatives."

The lighter debt burden will help take some of the pressure off states looking for ways to cut spending to ease lingering budget pressures from the fiscal storm unleashed by the Great Recession. Thirty-eight states saw a decline in tax-supported debt as a percentage of the personal income earned by state residents, according to Moody's.

That ratio has also eased as an improved job market has helped boost incomes. Overall, tax-supported debt fell to 2.5 percentage of personal income, the second decline in a row.

While Moody's expects state borrowing to remain light this year, the credit rater said the pace will pick up eventually as states confront the need to fix crumbling highways and other aging infrastructure.

The American Society of Civil Engineers estimates that some $3.6 trillion in infrastructure repairs will be needed by 2020. That's roughly what state and local governments already owe in municipal bonds outstanding.