Industry News

On December 3, 2025, S&P Global Ratings published its report, U.S. States 2026 Outlook: As States Face Widening Challenges, Their Actions Likely Will Uphold Credit Stability. S&P Global indicated that states’ credit fundamentals seem stable and remain in a position of relative credit strength.

Some key trends include:

• Tax cuts and conformity will likely create potential volatility for states in fiscal 2026.
• Changes in federal government policy designed to shift costs to states may increase new operating pressure and reduce local economic development.
• States will likely continue to adjust to the new policy environment with budgetary and legislative actions to address imminent cost increases from federal program changes and funding shifts.
• Demographic challenges of an aging and slower-growing nation may unequally affect various states.
• Changes are expected to occur due to the future course of the growth in energy states.

According to the report, “Ongoing risks, including economic and market volatility, aging infrastructure, health care inflation, and aging demographics affecting the public workforce could hinder recent progress without proactive capital planning and disciplined pension and OPEB governance.” It also notes, “Not all states have the same fixed costs flexibility. The median aggregate carrying cost per capita for debt, pension, and OPEB in fiscal 2024 was $331, but seven states exceed $1,000 per capita. We believe that the higher the amount, the less financial flexibility a state may have to address future costs. We continue to monitor the growth of alternate assets in pension fund holdings. This growth is occluding risks within an asset allocation structure, as reporting is limited.”

The report is available here.