A Century of State and Local Debt

State and local debt increased briskly in the early 20th century, exploding into the Great Depression. After the trough of the Great Depression, state and local debt declined until just after World War II. In the post-World War II era state and local debt has increased, but slowly, and has never reached the peaks recording in the depths of the 1930s.

At the start of the 20th century, state government debt stood at about 1 percent of GDP. It expanded briskly through the 1920s, reaching 2.2 percent of GDP in 1929. State debt exploded to 5.31 percent of GDP in 1933 before declining slowly to a low of 1.03 percent in 1946 after World War II.

At the start of the 20th century, local government debt stood at about 8 percent of GDP. It expanded briskly in the 1920s, reaching 13.5 percent of GDP in 1929. Local debt exploded to 28 percent of GDP in 1933 before declining to a low of 5.45 percent in 1948 after World War II.

Recent State and Local Debt

State and local debt has declined as a percent GDP since the Great Recession.

In 1990 state government debt stood at 5.3 percent of GDP and local government debt stood at 9.1 percent. Both state and local debt remained pretty flat in the 1990s.

State and local debt increased during the 2001-01 recession, with state debt reaching 6.3 percent GDP in 2004 and local debt reaching 9.74 percent GDP in 2004. State and local debt flattened out in the growth years of the 2000s until the Great Recession when state debt bumped up to a peak of 7.45 percent in 2010 and local debt bumped up to 11.55 percent GDP in 2010.

In the recovery after the Great Recession, both state and local debt have come down, with state debt in 2023 at 3.90 percent GDP and local debt in 2023 at 7.51 percent GDP.

State-by-State Comparison of State and Local Debt

States shuffle the deck from decade to decade

The bubble chart above shows total state and local debt in 1960 for each state in dollars per capita compared against the Gross State Product (GSP) in dollars per capita. The chart shows a correlation between state and local debt and GSP. Notable outlier is Nevada with high GDP per capita and moderate debt.

The bubble chart above shows total state and local debt in 1985 for each state in dollars per capita compared against the Gross State Product (GSP) in dollars per capita. The states are all in a bunch, except Alaska which is in the middle of its North Slope oil boom.

The bubble chart above shows total state and local debt in 2020 for each state in dollars per capita compared against the Gross State Product (GSP) in dollars per capita. The blue states, New York, Massachusetts, and Connecticut, show high GDP and high debt.