The Municipal Market

2024 State of the States Municipal Credit Report

Outlook shifts to “stable” in anticipation of return to pre-pandemic fiscal conditions

In its annual release, Conning reveals that as costs rise, states should prioritize essential spending 

June 04, 2024 — HARTFORD, Conn.–(BUSINESS WIRE)–Conning, a leading global investment management firm, today released its annual State of the States Report that analyzes municipal credit across all 50 states. Conning’s outlook on state credit quality for 2024 is upgraded to “Stable” from 2023’s “Declining” outlook in anticipation of a return to pre-pandemic fiscal conditions. This year, the report detected signs that some of the pandemic migration patterns toward Southern and Western states are slowing.

“State rainy-day funds have remained at near-record levels, offering a cushion against inflation and increased costs as well as potential revenue declines after a period of surging federal funds, economic growth and stock market gains,” says Karel Citroen, Conning’s Head of Municipal Credit Research and lead author of the State of the States Report.

The report features the ranking of 13 metrics indicating relative state credit health, measuring business climate, financial metrics and economic data including income levels and housing activity. Conning also provides access to an interactive data platform featuring an array of charts and illustrations, an analysis of the findings of each of the report’s metrics, a history of Conning’s overall State of the States rankings, and a link to the company’s full 2024 report.

Top-Five Ranked States in 2024

Top-Five Ranked States in 2023

1. Nebraska

1. Texas

2. Wyoming

2. Florida

3. Florida

3. South Dakota

4. North Dakota

4. Tennessee

5. South Dakota

5. Idaho


Evidence of Reversals of Pandemic Migration Patterns

Influenced by the ability to work remotely during the pandemic, Americans migrated away from the East Coast and California. However, this year there is evidence of some reverse migration patterns due to a variety of developments resulting from rising costs in the areas Americans relocated to and the relative lower cost in areas abandoned during the pandemic.

For example, Texas, Florida, South Dakota, Tennessee and Idaho ranked high last year and performed well again in this year’s report. However, states in the Northeast also performed well this year, suggesting affordability may have become a concern for states like Utah and Idaho that previously experienced the most significant home price appreciation, driving state and local government spending and costs higher.

The rankings for three New England states (Rhode Island, New Hampshire and Vermont) rose notably this year while Delaware and Hawaii plummeted 21 and 11 spots, respectively, into the bottom five, alongside perennially low-ranking states Illinois, Louisiana and Mississippi.

“State rainy-day funds have remained at near-record levels, offering a cushion against inflation and increased costs as well as potential revenue declines after a period of surging federal funds, economic growth and stock market gains...

Florida fell one position from last year to third place as Nebraska and Wyoming claimed the top two spots. Last year’s #1 ranked Texas dropped five spots to sixth place as a result of subpar tax revenue growth and the most substantive drop in the housing price index (HPI). Rhode Island advanced the most, climbing 27 spots to # 21, driven by robust population growth resulting in higher tax revenue, employment and HPI performance. New Hampshire saw a nearly 12% increase in tax revenues from the prior year; Alaska witnessed a staggering 50% decline.

Here are examples which illustrate some of the trends this year:

Population – South Carolina, Florida, and Texas had the greatest increases in population. In the case of South Carolina, additional residents provided a larger workforce, but strong population gains in Nevada resulted in high unemployment rates due to insufficient opportunities for work. New Jersey, Rhode Island and Massachusetts were able to attract more residents after losing population during the pandemic.

It takes a large change in population or economic activity to move the needle in terms of GDP per capita. New York, Massachusetts, Washington, California and Connecticut remain among the top states. Hawaii bounced back six spots after standing out as a laggard in 2022 while Texas did the opposite, dropping seven spots.

Population growth in Arizona and Idaho slowed after attracting residents. States like Georgia, Tennessee, Arkansas, North Dakota, and Wyoming are cause for concern, since their population growth outpaced employment growth, potentially signaling a shortage of job opportunities for residents.

Housing – The Northeast did well with Rhode Island, Vermont, Connecticut, New Jersey and New York in the top 10 for greatest improvement in the HPI. States in the West and South likely fell due to rising home prices and affordability issues as people moved there during the pandemic, many from East Coast states and California.

Employment – All 50 states except Oregon recorded employment growth. Nevada, Alaska and South Carolina had the largest percentage increases in employment growth. Colorado surged 39 spots to tenth place thanks to employment growth in government, education, health services, professional and business services. New York, West Virginia, Alaska, Rhode Island, and Missouri had robust employment growth despite modest populations.

GDP – Natural resources such as oil, natural gas, coal and agriculture helped top-performing states like North Dakota, Texas, Wyoming, Alaska, Oklahoma and Nebraska in terms of real GDP growth. Retail trade GDP, a leading contributor to growth in 23 states, was up in all 50 states.
“States are encouraged to engage in realistic discussions about prioritizing needs over wants in order to successfully navigate the changing fiscal landscape,” Citroen cautions. He adds an increase in unemployment rates could generate more demand for government services and reduce state tax revenues.

“This is an area of concern to monitor. If the labor market deteriorates, we would anticipate a return of workers to office settings as employers gain leverage in remote-work discussions. This shift may benefit states with larger metropolitan areas.”



About Conning’s Municipal Credit Research and State of the States Report
Conning’s State of the States Report helps the firm’s investment professionals make better-informed credit decisions and improve relative value for client portfolios. State of the States indicators include measures of economic activity, such as income levels, housing prices, population changes, tax revenue growth, state gross domestic product growth, unemployment rates and employment growth, as well as a state’s finances and overall business environment (i.e., ability to attract new business). The findings in the 2024 edition are measured in real GDP to remove the effect of inflation and focus solely on the output of a state’s economy, a change from last year’s report.
Conning is a leading investment management firm with nearly $120 billion in global assets under management.* With a long history of serving the insurance industry, Conning supports institutional investors, including insurers and pension plans, with investment solutions, risk modeling software, and industry research. Founded in 1912, Conning has investment centers in Asia, Europe and North America. Conning is part of the Generali Investments platform, which has approximately $704 billion in assets under management.**
* As of March 31, 2024, includes Conning, Inc., Conning Asset Management Limited, Conning Asia Pacific Limited, Conning Investment Products, Inc., Goodwin Capital Advisers, Inc. and assets sub-advised by Conning subsidiary, Octagon Credit Investors, LLC (collectively, “Conning”

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