#17, New York

States with the Most Debt

Debt 2010: $123.04 billion

Pre-budget Deficit 2011: $8.50 billion

GDP 2009: $1.18 trillion

Debt/GDP Ratio: 10.45 percent

On the chopping block: With the threat of a shut down in Albany and the state’s finances verging on desperate, the state legislature finally passed a budget in early August. The state's public schools may also be nearing desperation, as the cuts proposed by Governor David Paterson include chopping $1.1 billion for state aid to schools.

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Most Debt-Strick... Governors across the nation breathed a collective sigh of relief last week when Congress passed a $26 billion stimulus bill to help states maintain jobs. Even the most bailout-bashing state executives have proven only too happy to take federal largesse to ease their fiscal problems.

And almost universally, there are problems. While not every state is legally bound to meet budget shortfalls—and avoid carrying deficits year-over-year—virtually every state legislature is contemplating cuts, from arts to social-welfare programs. Most are falling short.

As in personal finance, debt is the pitfall that can come back to haunt states trying to meet their financial obligations. With that in mind, The Daily Beast ranked each state in order of its debt-to-GDP ratio—the higher the ratio, the more likely a state will remain mired in debt.
#1, Rhode Island Debt 2010: $10.02 billion

Pre-budget Deficit 2011: $395 million

GDP 2009: $46.50 billion

Debt/GDP Ratio: 21.54 percent

On the chopping block: Rhode Island’s judges and court workers are trudging along despite a lack of funds cutting paid work days per week and 53 positions that remain unfilled. “This is not a time for expensive initiatives and hefty new capital projects. It is a time to do the very best with the limited resources we have,” said Chief Justice Paul A. Suttell. The states court system has responded to budget shortfalls in part by disposing of cases on backlog.

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#2, Massachusett... Debt 2010: $79.06 billion

Pre-budget Deficit 2011: $2.70 billion

GDP 2009: $381.31 billion

Debt/GDP Ratio: 20.73 percent

On the chopping block: MassHealth, the state’s health program for low-income residents, has had nearly $850 million cut from its budget since 2009. The biggest chunk—$600 million—comes out of provider reimbursements, followed by $140 million cut to serve qualified legal immigrants and $56.3 million used to cover adult oral care. The state is responsible for about half of MassHealth’s budget.

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#3, Alaska Debt 2010: $6.76 billion

Pre-budget Deficit 2011: $0 billion

GDP 2009: $36.55 billion

Debt/GDP Ratio: 18.50 percent

On the chopping block: An appropriation for a new state office building, which was cut from $5 million to $2 million. But despite its poor debt-to-gdp ratio, Alaska has used its oil riches to avoid painful social welfare cuts other states have resorted to. Governor Sean Parnell has refused to accommodate new state spending going forward. "At this point, you can just count on me to work to drive agency requests down," he said.

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#4, Connecticut Debt 2010: $36.20 billion

Pre-budget Deficit 2011: $5.10 billion

GDP 2009: $216.87 billion

Debt/GDP Ratio: 16.69 percent

On the chopping block: State-funded higher education took a hit when Governor Jodi Rell signed her $19 billion budget in early May. Connecticut State University had $11 million transferred from its operating reserve account to the state’s general fund. A $309 million package from the federal government in August avoided teacher layoffs and Medicaid cuts.

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#5, Montana Debt 2010: $5.54 billion

Pre-budget Deficit 2011: $0

GDP 2009: $33.26 billion

Debt/GDP Ratio: 16.66 percent

On the chopping block: Budget shortfalls in Montana are slated to come in part out of state workers’ pocketbooks and wallets. Despite protests from the Montana Public Employees Association, budget director David Ewer has publicly raised the possibility of future pay freezes.

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#6, Vermont Debt 2010: $4.14 billion

Pre-budget Deficit 2011: $338 million

GDP 2009: $26.48 billion

Debt/GDP Ratio: 15.64 percent

On the chopping block: The Vermont Department of Education is aiming to slash 2 percent from its overall budget—about $23 million. A $19 million influx from the federal government could help stave off some, though not all, teacher layoffs. “There are not really many more places to cut without gutting programs,” said superintendent Ron Stahley. “We have to balance these targeted reductions with maintaining viable programs."

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#7, New Hampshir... Debt 2010: $8.36 billion

Pre-budget Deficit 2011: $365 million

GDP 2009: $61.69 billion

Debt/GDP Ratio: 13.55 percent

On the chopping block: Aid to at-risk children. A special legislative committee approved Governor John Lynch’s plan to cut, among other things, $15 million from the Department of Health and Human Services, including $2.5 million for children the courts place in special programs.

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#8, West Virgini... Debt 2010: $7.40 billion

Pre-budget Deficit 2011: $134 million

GDP 2009: $56.54 billion

Debt/GDP Ratio: 13.09 percent

On the chopping block: Libraries. Governor Joe Manchin's line item veto of the state budget in April overruled the legislature's budget, which kept the state library budget intact, in favor of a five percent funding cut.

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#9, New Jersey Debt 2010: $57.18 billion

Pre-budget Deficit 2011: $10.07 billion

GDP 2009: $476.34 billion

Debt/GDP Ratio: 12.00 percent

On the chopping block: One of the biggest losers will likely be school districts, which are slated to have their funding decreased by $820 million. With $268 million coming in federal aid, 4,000 teachers may be able to keep their jobs. “Public opinion may well shift a bit when school is back in session, once parents start seeing the effects,” said Ben Dworkin of the Rebovich Institute for New Jersey Politics.

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#10, New Mexico Debt 2010: $8.94 billion

Pre-budget Deficit 2011: $333 million

GDP 2009: $74.91 billion

Debt/GDP Ratio: 11.93 percent

On the chopping block: Tax increases and cash reserves were not enough to cover the state's spending, with state agencies across the board suffering 3 percent budget cuts saving $5.3 billion. Federal stimulus money totaling $65 million will save public schools from massive cuts that had been expected from state contributions.

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#11, Maine Debt 2010: $5.30 billion

Pre-budget Deficit 2011: $940 million

GDP 2009: $49.22 billion

Debt/GDP Ratio: 10.77 percent

On the chopping block: MaineCare. The state's health service's department is one of the major fiscal loss leaders in state’s budget as it's slated to lose $45 million. The cuts will hamper access to health care and programs for the developmentally disabled.

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#12, Delaware Debt 2010: $6.47 billion

Pre-budget Deficit 2011: $377 million

GDP 2009: $60.09 billion

Debt/GDP Ratio: 10.77 percent

On the chopping block: State employee pay cuts. Contrary to most states, Delaware is putting money back in the pockets of salaried state workers, rescinding last year's 2.5% pay cut since revenue projections were raised.

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#13, South Carol... Debt 2010: $16.67 billion

Pre-budget Deficit 2011: $1.30 million

GDP 2009: $155.06 billion

Debt/GDP Ratio: 10.75 percent

On the chopping block: The arts, as Governor Mark Sanford vetoed $1.2 million for the state Arts Commission and $1.6 million for the South Carolina State Museum. Health care, too, as 16,000 low income South Carolinian women will lose a program that offered free screenings for breast cancer.

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#14, Maryland Debt 2010: $28.94 billion

Pre-budget Deficit 2011: $2.00 billion

GDP 2009: $269.52 billion

Debt/GDP Ratio: 10.74 percent

On the chopping block: Funding for local road projects. In order to reach a compromise with the state's teachers union over the rising costs of teacher pensions, the House agreed to a bill in April that eliminated nearly all of "highway user" revenue for Maryland counties. Until 2015, counties will receive less than a tenth of the hundreds of millions for road construction they'd received every year for the last two decades.

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#15, Illinois Debt 2010: $67.45 billion

Pre-budget Deficit 2011: $13.50 billion

GDP 2009: $629.85 billion

Debt/GDP Ratio: 10.71 percent

On the chopping block: The state's mental-health services will lose $91 million in funding during the next fiscal year as a result of Illinois' extreme budget gap. Illinois Human Services chief Michelle Saddler has expressed her worry over the effect of the large cut, saying, "I'm concerned that we will see a real public-health crisis and real public-safety crisis with these cuts."

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#16, Louisiana Debt 2010: $18.69 billion

Pre-budget Deficit 2011: $1.00 billion

GDP 2009: $176.77 billion

Debt/GDP Ratio: 10.57 percent

On the chopping block: The state's public hospital system, which will lose $68 million in the current iteration of the state budget bill. Also slated to lose millions are public universities and prisons.

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#17, New York Debt 2010: $123.04 billion

Pre-budget Deficit 2011: $8.50 billion

GDP 2009: $1.18 trillion

Debt/GDP Ratio: 10.45 percent

On the chopping block: With the threat of a shut down in Albany and the state’s finances verging on desperate, the state legislature finally passed a budget in early August. The state's public schools may also be nearing desperation, as the cuts proposed by Governor David Paterson include chopping $1.1 billion for state aid to schools.

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#18, South Dakot... Debt 2010: $3.80 billion

Pre-budget Deficit 2011: $102 million

GDP 2009: $36.99 billion

Debt/GDP Ratio: 10.27 percent

On the chopping block: Regional teaching agencies. South Dakota's legislature eliminated $1.7 million in funding last year for the Education Service Agencies, which train teachers, and cut $500,000 that remained last session.

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#19, Hawaii Debt 2010: $6.18 billion

Pre-budget Deficit 2011: $594 million

GDP 2009: $60.75 billion

Debt/GDP Ratio: 10.17 percent

On the chopping block: State jobs and tax credits. In April, the legislature agreed to cut 800 jobs and eliminate tax credits for investment in high-tech in order to compensate for the $1.2 billion budget gap over the next two years.

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#20, Pennsylvani... Debt 2010: $53.29 billion

Pre-budget Deficit 2011: $4.10 billion

GDP 2009: $541.41 billion

Debt/GDP Ratio: 9.84 percent

On the chopping block: Taxes on tobacco products and severance, and proposals to sell the state's monopoly on liquor sales to private investors are the most controversial ways the state has come up with to remedy its debt. Governor Ed Rendell had to announce $250 million in agency and appropriations funding, after federal funding fell short of expectations.

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#21, Wisconsin Debt 2010: $23.51 billion

Pre-budget Deficit 2011: $3.40 billion

GDP 2009: $242.01 billion

Debt/GDP Ratio: 9.71 percent

On the chopping block: Health insurance. Facing a budget gap of $6.6 billion last year while working on its two-year budget, legislators slashed $625 million from state Medicaid—representing 10 percent of the state’s contribution.

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#22, Missouri Debt 2010: $21.94 billion

Pre-budget Deficit 2011: $730 million

GDP 2009:v $236.46 billion

Debt/GDP Ratio: 9.28 percent

On the chopping block: Social services and mental health. Since the beginning of last year, 2,200 government jobs have been eliminated, but in the interest of protecting education funding, some more positions may be at risk. Among those named: child protection and welfare office workers.

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#23, Kentucky Debt 2010: $14.25 billion

Pre-budget Deficit 2011: $780 million

GDP 2009: $154.94 billion

Debt/GDP Ratio: 9.20 percent

On the chopping block: Governor Steve Beshear has threatened that "harsh cutbacks to education, economic development and care for Kentuckians with mental illness and mental retardation" are afoot, as well as the veto of several state-funded municipal projects which were not sufficiently funded.

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#24, Indiana Debt 2010: $23.39 billion

Pre-budget Deficit 2011: $1.30 billion

GDP 2009: $256.14 billion

Debt/GDP Ratio: 9.13 percent

On the chopping block: State agency budgets. Agencies were asked to cut an additional 5 percent from spending in April, on top of the 10 percent reduction that had already been instituted earlier this year.

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#25, Washington Debt 2010: $29.36 billion

Deficit 2012*: $1.20 billion

GDP 2009: $322.93 billion

Debt/GDP Ratio: 9.09 percent

On the chopping block: As a salve to budget shortfalls, Washington state implemented a tax on gum, bottled water, beer and candy. The projected revenue from the extra tax? $122 million over the next year. Washington operates on a 2-year budget.

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