Despite Cost Pressures and Decelerating Growth, Conning Maintains a Stable Outlook in its State of the States Report
- State fiscal strength is increasingly tied to demographic and income trends, as states that attract and retain residents grow their tax base and capacity to absorb rising costs.
- Plains, Mountain West, and parts of the Southern U.S. lead the ranking this year.
- South Dakota rose 17 places to first place and Texas moved up six places to fifth place while Florida, which held the #1 spot in 2022 and third place in 2024, dropped 20 points.
HARTFORD, CT – June 2, 2026 – Conning, a leading global investment management firm, today released its annual State of the States Report ranking analyzing the fiscal and economic health of all 50 U.S. states. This year’s report shows U.S. states entered 2026 with continued fiscal resilience and economic conditions. While rising cost pressures and moderating economic growth are creating headwinds, state finances remain resilient overall, supporting Conning’s “stable” outlook. The report’s ranking offers explanations as to why some states thrive while others struggle, based on a unique combination of 13 metrics which include such factors as GDP and employment growth; socioeconomic trends such as population shifts, income levels and tax policy; and state balance sheets.
| Top Five Ranked States in 2026 | Top Five Ranked States in 2025 |
| 1. South Dakota | 1. Idaho |
| 2. Utah | 2. Utah |
| 3. Tennessee | 3. North Carolina |
| 4. North Carolina | 4. Nevada |
| 5. Texas | 5. Virginia |
“State revenue growth persists, even though the effects of post-COVID Federal stimulus have faded and migration patterns have begun to change,” notes Karel Citroen, Managing Director at Conning. “At the end of the day, it still comes down to jobs, affordability, and how competitive a state is economically. Florida is still growing, but migration has slowed and affordability is becoming more of a constraint, while Texas continues to benefit from population inflows and relatively strong employment trends.”
“Affordability, labor market conditions, and migration trends are increasingly separating outperforming states from those under pressure.. They have led to wide differences between states in terms of demographic trends, economic competitiveness, policy decisions and exposure to structural risks,” Citroen observes. For example, States’ financial resources tend to grow with the breadth and strength of their tax base, making income and population growth important indicators of longer‑term credit capacity. At the same time, cost of living pressures and exposure to climate‑related risks are playing a larger role in shaping migration patterns. States able to attract and retain residents are generally better positioned to absorb rising infrastructure, healthcare, and climate costs, while those experiencing outmigration may face increasing pressure to raise revenues or adjust spending priorities.
This year, fundamentals continue to favor the Plains, Mountain West, and parts of the South, where our rankings highlight population inflows, diversified economic growth, comparatively low-cost structures, and strong balance sheets. Top states are outperforming due to a combination of disciplined fiscal management, resilient labor markets, and favorable demographic trends.
South Dakota rose 17 places to first place, and Texas moved up six places to fifth place. States like Colorado, New Mexico, North Dakota, Arizona and Montana also rose significantly in rank. In contrast, Florida, which held the #1 spot in 2022 and the third place in 2024, dropped 20 points. Massachusetts, Maryland, Nevada, New Hampshire, and Rhode Island also declined significantly.
While overall fiscal and economic conditions remain stable, several state credit drivers and population trends are showing signs of moderation, highlighting areas state administrators may need to monitor more closely:
State Fiscal Drivers
- States’ revenue growth continued to slow from higher post-pandemic levels.
- Employment growth has slowed, and unemployment rates have edged higher in several states.
- Reliance on Federal funding remains elevated relative to historical norms.
- Capital needs are reflected by record gross issuance. The implications for financial risk and balance sheet metrics remain uncertain.
- The elevated growth of reserve levels has slowed as several states have begun to draw down balances or experience relative declines as spending pressure rises.
- Flattening reserve positions suggest peak fiscal flexibility may have passed, particularly for larger states with rising fixed costs. (Examples: Wyoming shows budget resilience with high reserve levels and low fixed costs while Connecticut has maintained moderate reserves, with fixed costs elevated far above the national median.)
- Housing appreciation slowed in 2025, reflecting affordability pressures and cooling demand and a possible indicator of the direction of property taxes.
Population Dynamics and Differences
- National population growth slowed materially over the past year, driven primarily by a sharp decline in net international migration which had previously offset aging demographics and weak natural population growth.
- Domestic migration also remains subdued reflecting structural constraints like housing affordability and reduced labor mobility.
- Lower cost of living, favorable tax environments, and employment growth have contributed to migration to states like South Carolina, Idaho, North Carolina, Texas and Tennessee. A decline in domestic in-flows to Florida contributed to slower population growth in the state.
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About Conning’s State of the States Report Research
Conning’s State of the States Report helps the firm’s investment professionals make better-informed credit decisions and improver relative value for client portfolios.
State of the States 13 criteria 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. To enhance the predictive nature of the rankings, 2025 findings began to reflect new Catastrophe Losses Per Capita and Cost of Living Index metrics (weighted 4% each) that replaced Debt Per Capita and Gross Domestic Product Per Capita (formerly weighted 8% each). The remaining 8% of unassigned weighting was distributed evenly across Economic Debt as a percentage of Personal Income, Reserves, Tax Revenue Growth and Population Growth indicators, which now each carry a 10% weighting.
ABOUT CONNING
Conning (www.conning.com) is a leading investment management firm with more than $190 billion in global assets under management as of December 31, 2025.* With a long history of serving insurance companies and other institutional investors, Conning supports clients 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 Generali Investments, a platform of asset management firms delivering a portfolio of specialist capabilities with approximately $736 billion in assets under management and more than 2,300 employees.**
* As of December 31, 2025, includes Conning, Inc., Conning Asset Management Limited, Conning Asia Pacific Limited, Conning Investment Products, Inc., Goodwin Capital Advisers, Inc. (collectively, “Conning”), and Conning subsidiaries Global Evolution Asset Management A/S, MGG Investment Group, Octagon Credit Investors, LLC, and Pearlmark Real Estate, LLC and its subsidiaries (collectively “Affiliates” and together with Conning, “Conning & Affiliates”).
** Generali Investments Holding S.p.A., data as at end of Q4 2025 net of double counting. Employee figures as of February 2026. Please note that the AUM of MGG Investment Group is not included in the platform’s total AUM, as the acquisition was completed on October 1, 2025. Generali Investments is part of the Generali Group. Generali Asset Management S.p.A. Società di gestione del risparmio, Generali Real Estate S.p.A. Società di gestione del risparmio, Infranity SAS, Sosteneo S.p.A. Società di gestione del risparmio, Sycomore Asset Management, Aperture Investors LLC (including Aperture Investors UK Ltd), Lumyna Investments Limited, Plenisfer Investments S.p.A. Società di gestione del risparmio, Conning, Inc., Conning Asset Management Limited, Conning Asia Pacific Limited, Conning Investment Products, Inc., Goodwin Capital Advisers, Inc. (collectively, “Conning”) and among its subsidiaries (Global Evolution Asset Management A/S - including Global Evolution USA, LLC and Global Evolution Fund Management Singapore Pte. Ltd - Octagon Credit Investors, LLC, Pearlmark Real Estate, LLC and MGG Investment Group), Generali Investments CEE are part of Generali Investments. Please note that the countries refers to the countries where the different funds of the asset management companies part of Generali Investments are registered for distribution. Please note that not all funds are registered in all the countries and not all the asset management companies are licensed to operate in such countries. Generali Investments Holding S.p.A. is the holding company holding, directly or indirectly, a majority of the shares in the asset management companies listed above.
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