Business
Majority of States Exceed Revenue Targets, Classified as ‘Stable’
BOSTON, February 23, 2026--Morgan Stanley Investment Management (MSIM) today released the 13th annual State of the States report, which indicates a stable credit outlook for most states and includes analysis of new factors tied to the global economy and the shifting balance between federal funding and state-driven support for national programs. The State of the States report examines the financial health of the 50 states and Puerto Rico and leverages MSIM’s proprietary ratings methodology.
About this update from Morgan Stanley
[{"type":"text","content":"Morgan Stanley Investment Management releases annual State of the States Report","length":79,"tagName":"p"},{"type":"text","content":"BOSTON, February 23, 2026--(BUSINESS WIRE)--Morgan Stanley Investment Management (MSIM) today released the 13th annual State of the States report, which indicates a stable credit outlook for most states and includes analysis of new factors tied to the global economy and the shifting balance between federal funding and state-driven support for national programs. The State of the States report examines the financial health of the 50 states and Puerto Rico and leverages MSIM’s proprietary ratings methodology.","length":511,"tagName":"p"},{"type":"text","content":"Report Highlights:","length":18,"tagName":"p"},{"type":"list","items":[{"val":[{"type":"text","content":"34 states exceeded revenue estimates in fiscal year 2025 and another nine met expectations; seven states (and Puerto Rico) reported revenue below estimates.","length":156,"tagName":"p","attribs":{}}]},{"val":[{"type":"text","content":"The State of the States report indicates stronger gross domestic product (GDP) growth, favorable investment returns and pension reforms may have prompted the median debt-to-GDP and unfunded pension-to-GDP ratios to significantly decline to 3.9% in 2024 from 8.3% in 2011.","length":271,"tagName":"p","attribs":{}}]},{"val":[{"type":"text","content":"Rainy day funds, also known as budget stabilization funds, are believed to be a strong indicator of how prepared a state is for recessions and economic downturns; on average, these funds were approximately 13% of expenditures, which is consistent with 2024 levels and approaching the record high of approximately 15%. However, five states have less in rainy day funds now than they did in 2007.","length":394,"tagName":"p","attribs":{}}]},{"val":[{"type":"text","content":"Interstate population migration affects state tax bases with Florida seeing the highest increase in adjusted gross income and New York seeing the largest decrease.","length":163,"tagName":"p","attribs":{}}]}],"tagName":"ul","bulletedList":true,"length":984,"olType":false},{"type":"text","content":"Craig Brandon, co-head of Municipals at Morgan Stanley Investment Management, emphasized the importance of deep research and analysis of a range of factors that influence states’ creditworthiness and overall...