SAN FRANCISCO, May 30 (Reuters) - U.S. states will slow their pace of borrowing as they adhere to tight budgets amid concerns over federal austerity measures, Moody's Investors Service said in a report on Thursday.
"Legal debt limitations, state-level austerity spending, and anti-debt sentiment have reduced states' appetite for new money borrowing," said Baye Larsen, a Moody's vice president and senior analyst.
"Additionally, debt plans have been influenced by uncertainty regarding federal fiscal policy and the impact of federal budget austerity on the national economy," Larsen said.
The rating agency added that it expects states will continue to defer debt plans until the effect of efforts to balance the federal budget are better understood.
Growth in debt issuance by U.S. states slowed to 1.3 percent in 2012, well below the 7 percent average annual growth of the past 10 years and the recent peak of 10 percent in 2009, Moody's said.
The combined amount of net tax-supported debt for the 50 states increased to $516 billion last year from $510 billion in 2011, the rating agency said.
Moody's said the largest contributors to growth in net tax-supported state debt last year were California, Massachusetts, Virginia and Washington, each adding between $1.2 billion and $1.7 billion in debt.
Meanwhile, seven states saw notable declines in net tax-supported debt, Moody's said.
"On a dollar basis, the largest decreases were in Arizona, Florida, Illinois and New York," the rating agency said. "On a percentage basis, Kansas and Utah saw the largest declines, at 8 percent and 7 percent, respectively."
Connecticut, Massachusetts, Hawaii, New Jersey and New York have the highest net tax-supported debt per capita, Moody's said, adding that state debt service costs rose by 3 percent last year, compared with 8.6 percent growth in 2011.