Conning Publishes 2023 State of the States Municipal Credit Report, Outlook Shifts to “Declining” Despite Improvements as U.S. Economy Expected to Slow

June 14, 2023

Interactive Exhibits Enable Deeper Understanding of Metrics


  • Texas replaced Florida as #1 in overall rank; both states benefit from strong economies, population growth and, in Florida’s case, an improved housing market.
  • Top five states had GDP growth, employment, revenue and population growth which skewed to the South and West regions.
  • States may see weaker revenues if the economy softens and several face significant infrastructure and pension costs, creating challenges to budgets that some are more prepared to handle than others.
  • Interactive graphics enable a closer look at the report’s 13 economic, socioeconomic and financial metrics by state and region.


HARTFORD, CT – June 14, 2023 –  Conning, a leading global investment management firm, today released its annual State of the States Report that analyzes municipal credit across all 50 states. Reserves are at all-time highs, pension and other post-employment benefit contributions have increased, and resource-dependent states caught up in 2022. However, the outlook on state credit quality is less favorable as economic conditions soften, the inflation that supports sales tax revenues will likely wane, and personal income taxes will probably decline with the labor market worsening, contributing to a declining 2023 outlook on state credit quality. 



Top Five Ranked States Bottom Five Ranked States
1.Texas 46. Ohio
2. Florida 47. West Virginia
3. South Dakota 48. Rhode Island
4. Tennessee 49. Louisiana
5. Idaho 50. Mississippi



“A weaker economy, tighter monetary policy, inflation and tapering Covid-19 aid may reduce tax-revenue growth and could diminish state credit quality,” says Karel Citroen, Conning’s Head of Municipal Credit Research and lead author of the State of the States Report. “If credit conditions soften, inflation could squeeze budgets, pushing sales tax collections down in states that rely on them, and causing the use of reserve funds to balance budgets. Some states are already experiencing the impact of weaker stock and labor markets on income tax collections and states that lowered taxes or expanded services could experience additional financial pressure,” Citroen said.


In the report, Conning analyzes 13 credit indicators to determine state credit health and assign rankings, with #1 being the highest and #50 being the lowest. Conning also offers access to an interactive platform featuring an array of charts and illustrations, an analysis 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 2023 report.



Highlights From 2023 State Credit Quality Rankings

Conning’s 2023 State of the States Report has changes at the top of its overall rankings with Texas moving up into first place and Florida, 2022’s #1 ranked state, falling to second. Both states benefitted from a strong economy, population growth and, in Florida’s case, an improved housing market while Texas outperformed in GDP per capita. Further:

  • Utah, which had held first place for three years prior to last year, fell to its lowest rank since 2015, in part due to how rising home prices affected affordability.
  • New Hampshire, which had benefitted from the pandemic’s work-from-home dynamic, dropped from the top five to 21 as work conditions normalized.
  • California was a notable laggard, dropping 14 spots to 42nd place, losing economic ground as reflected by lower tax collections.
  • New York’s population declined most, followed by Illinois and Louisiana.
  • All 50 states recorded employment growth with parts of the South and West offering the best jobs picture.
  • Nevada, Hawaii and Texas remained in the top five for employment growth, benefiting from an influx of new residents.


State Credit Quality Continued to Thrive in 2022

Since its 2021 State of States Report, Conning assigned a “stable” outlook for state credit quality until this year. Relatively benign economic and credit conditions have prevailed since 2021, with state credit quality riding the wave of an economy recovering from the impact of the pandemic. State coffers benefitted from a strong labor market and nominal growth in consumer spending. Income taxes performed very well in 2022 as the economy continued its pandemic recovery and Americans returned to work. Sales tax collections also did well due to federal stimulus-supported consumer spending and a rebounding economy.


Higher than expected tax-revenue growth in 2022, combined with abundant federal aid, led to record financial reserves and much-improved state financial metrics which will allow many states to navigate challenges from a weakening economy, tighter monetary policy, historically high inflation and a tapering of federal Covid-19 aid.

Reasons For “Declining” Outlook For 2023

There are growing signs that the unprecedented tax-revenue growth of the past few years will slow substantially.


With most states ending their fiscal year on June 30, credit conditions are expected to soften this year and into 2024. For example, revenue projections will look weak compared to prior years, even more so because the inflation that boosted sales tax collections is coming down from historically high levels. Inflation will remain a budgetary issue, however, as it pushed many expenditures higher. This will squeeze budgets and, in some cases, force states to use reserve monies to remedy shortfalls. Fixed costs are the other side of the preparedness question, and several states face significant infrastructure spending and pension obligations that may challenge their fiscal stability in the event of an economic downturn.


As talk of a recession becomes more prevalent, mid-year budget forecasts may be revised downward in many states. In some cases, the impact of weaker stock and labor markets on income tax collections is already visible. Lastly, states using surplus revenues as a reason to lower taxes or expand services could be pinched.



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 2023 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 over $201 billion in global assets under management as of March 31, 2023.* 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.   


*As of March 31, 2023, represents the combined global assets under management for the affiliated firms under Conning Holdings Limited (CHL) and Cathay Securities Investment Trust Co., Ltd. (“SITE”).  SITE is a separate legal entity under Cathay Financial Holding Co., Ltd. which is the ultimate controlling parent of all Conning entities. The CHL CEO sits on the Board of SITE and helps oversee the business. 




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