States and local governments across America have collectively accumulated over $6 trillion in liabilities, roughly $5 trillion of which are long-term obligations. These burdens are unevenly distributed. Some states keep a disciplined balance sheet, while others accumulate massive liabilities, requiring payments that crowd out present-day spending—to the detriment of both current taxpayers and future generations. The mountain states illustrate this debt divide.
According to the Government Finance Dashboard, a Reason Foundation report that compiled over 20,000 audited financial statements of state governments and nearly every city, county, and school district, long-term state and local government debt now totals roughly $14,700 per person nationwide.
How does our region fare? On one end, Idaho, Utah, Montana, and Wyoming consistently rank near the bottom of debt burden rankings. Idaho ranks last among U.S. states in per capita long-term debt, at $3,900—making it the state with the least per capita debt in the country. Utah follows with roughly $5,500; Montana with $6,500; and Wyoming with $8,600.
But other states in the region show a different debt picture. Washington has the highest per-resident debt in the area, owing approximately $15,400 per capita, making it the 11th highest in the nation. Colorado comes next, ranking 13th with $14,000, followed by Oregon at 16th with $13,000.
In states such as New York, New Jersey, Connecticut, Illinois, and Hawaii, total state and local government debt exceeds $26,000 per capita, making them the most indebted states in the country.
These differences result from many deliberate choices. States that keep debt low made consistent efforts to restrain borrowing and fund their employees’ pensions and retiree obligations. Those with higher debt levels depend on borrowing to fund recurring expenses and have avoided reckoning with their growing pension costs.
Elevated debt is not only a more expensive way to finance public services; it also heightens fiscal risk. Heavy debt burdens constrain budget flexibility, raise borrowing costs, and increase vulnerability to economic downturns.
Over 50% of state and local government long-term debt consists of unfunded pension and health care benefits promised to public employees. The bonds that governments issue to fund infrastructure projects, such as roads and bridges, to build and upgrade schools, and to pay for other programs, represent another 33% of all state and local debt.
Recent initiatives in some mountain states could worsen the financial situation of already fragile ones. For example, in Washington, lawmakers have decided to defer required contributions to the state’s pension fund to address short-term budget pressures, a move that will lead to lower payments in the present that must be made up in the future, plus interest. In Colorado, policymakers are considering doing the same, pushing costs into the future by skimming pension contributions to afford employee raises, despite the system being only about 70% funded.
Reforms that modernize pension and retiree health systems can mitigate these risks by preventing underfunding, strengthening retirement security, and stabilizing long-term costs. States can also reduce expenses by evaluating whether certain services currently performed in-house can be more efficiently performed by specialized private firms, such as trash collection, technology support, and cleaning services. In addition, governments can reduce interest costs by selling underused buildings, land, and other underutilized assets and applying the proceeds to debt reduction.
The disparities across the mountain states serve as a reminder that fiscal health is never guaranteed: It is the result of policy choices made year after year. While Idaho, Utah, Montana, and Wyoming have maintained stability through disciplined budgeting and limited borrowing, Washington, Colorado, and Oregon stand among the most indebted states in the country.
Unless policymakers and the public commit to prioritizing the funding of their existing obligations and reaffirming fiscal discipline, even the region’s healthiest states could erode their fiscal standing.
Detailed financial data for each state and local government entity is available at Reason’s new Government Finance Dashboard.
Mariana Trujillo is Managing Director of Government Finance at the Reason Foundation. Jason Mercier is Vice President and Director of Research at the Mountain States Policy Center.
