Conning’s annual State of the States Report is our ranking of the 50 U.S. states by credit quality based on our examination of economic conditions, socioeconomic trends, and the states’ balance sheets. We present the report in an interactive format offering viewers greater flexibility in reviewing the data upon which we base our conclusions.

Key Findings

• Conning maintains our “stable” outlook for state credit quality as we think states have demonstrated sufficient fiscal resilience to manage both known challenges and unpredictable developments.
• States generally began fiscal year 2025 with stable budgets and robust rainy-day funds but some are experiencing shortfalls amid increasing costs and declining tax revenues.
• Financial metrics overall are probably the strongest since the pandemic but headwinds in fiscal year 2026 could pose greater fiscal management challenges. 
• Developments of the past five years have led us to refine our methodology which includes adding cost of living and catastrophe losses per capita metrics to our evaluation. 

Executive Summary: Conning Maintains "Stable" Outlook in 2025

Conning maintains our “stable” outlook for state credit quality in 2025, even though five years post-COVID states are again facing uncertainties, this time in the form of federal-level changes which will require prudent budget management. 

Our “stable” view is consistent with our 2024 State of the States outlook and has been the general trend for the last five years. (Our view in 2020 was “negative” due to the threat of COVID-19, and in 2023 it was “declining” in anticipation of a weakening economy, higher inflation and tapering federal aid.) 

In 2025, states face a period of significant transition as federal policies shift toward increased state responsibility, particularly in infrastructure, education and healthcare, where federal funding is expected to decrease from pandemic era spending levels. Although states generally began fiscal year 2025 with stable budgets and robust rainy-day funds, some are experiencing shortfalls amid increasing costs and declining tax revenues (some are self-inflicted: 10 states reduced income tax rates or implemented automatic tax cuts in recent years, hampering their ability to withstand these new challenges). The fiscal outlook is further complicated by emerging challenges ranging from immigration and high-impact weather events to housing affordability (which remains a concern across regions) and insurance market stability.¹

Nevertheless, Conning’s “stable” outlook is based on our belief that states have demonstrated sufficient fiscal resilience to navigate this combination of known challenges and unpredictable developments, although they differ significantly in balance-sheet strength, governance, socioeconomic conditions and the ability to leverage an improved economic environment. Several states have implemented governance mechanisms to trigger special legislative sessions if federal actions substantially impact their budgets. Others have set aside funds to counter federal funding cuts or have created special committees to monitor and respond to federal actions affecting state finances.

Developments of the last five years have led us to refine our methodology for this year’s State of the States analysis and we have made strategic adjustments to enhance the predictive nature of our state rankings (see “Methodology Changes” on page 3). 

This year’s rankings show significant movement across the board, reflecting both our refined methodology and changing economic conditions. Idaho claimed first place with an impressive 11-position climb. Northeastern states like Connecticut (9), New York (21), Delaware (25) and Massachusetts (15) also showed remarkable improvement, jumping 30, 23, 20 and 18 positions, respectively, partly due to their resilience against catastrophic losses.

Among our top five states, Utah (2), North Carolina (3), Nevada (4), and Virginia (5) all showed notable improvements based on their overall economic strength. At the other end of the spectrum, Louisiana fell two places to 50, preceded by Oregon (49), Illinois (48), West Virginia (47), and New Mexico (46), with Kansas experiencing the steepest decline of 28 positions to 44, as a result of various economic challenges.

Footnote:
¹ ©2025 Conning, Inc., “Crisis in Homeowners Insurance 2024,” Alan Dobbins, https://www.conning.com/insurance-expertise/conning-library 

About Conning
Conning is a leading investment management firm 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.

©2025 Conning, Inc. This document is copyrighted with all rights reserved. No part of this document may be distributed, reproduced, transcribed, transmitted, stored in an electronic retrieval system, or translated into any language in any form by any means without the prior written permission of Conning. Conning does not make any warranties, express or implied, in this document. In no event shall Conning be liable for damages of any kind arising out of the use of this document or the information contained within it. This document is not intended to be complete, and we do not guarantee its accuracy. Any opinion expressed in this document is subject to change at any time without notice.

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This document is for informational purposes only and should not be interpreted as an offer to sell, or a solicitation or recommendation of an offer to buy any security, product or service, or retain Conning for investment advisory services. The information in this document is not intended to be nor should it be used as investment advice.