Tennessee among least indebted states in new national report

Tennessee continues to post one of the smallest debt loads of any state government in the country, according to new findings from the Reason Foundation.

The think tank’s State and Local Government Finance Report 2025 ranked Tennessee among the seven least indebted states in America, with total state liabilities under $10 billion and per-capita debt below $3,000. Only Utah, Nebraska, South Dakota, Oklahoma, and Indiana reported similar levels.

By comparison, the national average stood at roughly $8,000 in state debt per resident. California led the nation with $497 billion in liabilities, followed by New York, Illinois, Texas, and New Jersey—all above $200 billion.

Tennessee’s low-debt profile reflects a long-standing “pay-as-you-go” approach to infrastructure and budgeting. The state has not issued transportation debt since 1976, opting instead to fund projects directly from recurring revenue. The model, reinforced by constitutional debt limits and consistently balanced budgets, has helped Tennessee maintain the top-tier AAA credit rating from Fitch, Moody’s, and Standard & Poor’s.

According to the state’s 2023 comprehensive annual financial report, Tennessee held about $1.59 billion in outstanding general-obligation debt—roughly $225 per resident. The figure has declined steadily over the past decade, supported by strong revenue growth and restrained borrowing.

The Reason Foundation’s analysis defines total state debt broadly, combining bonded obligations with unfunded pension and retiree-health liabilities. Nationwide, roughly 72 percent of all state liabilities are long-term, driven by employee benefit costs. Tennessee’s smaller exposure to those obligations places it near the bottom of the national rankings.

Comptroller Jason Mumpower and Governor Bill Lee have both credited Tennessee’s debt-averse fiscal structure with preserving stability through economic downturns. Fiscal analysts say the same restraint that limits borrowing also enhances investor confidence and keeps future tax pressures low.

While states such as California and Illinois carry hundreds of billions in combined debt and unfunded pension costs, Tennessee’s balance sheet remains among the strongest in the nation. The Reason Foundation estimates total state-level debt across the country at $2.7 trillion—meaning Tennessee’s share accounts for less than half of one percent of the national total.