ABSTRACT
Local governments would be hard-pressed to provide their current large menu of important services, along with the necessary infrastructure, without the ability to borrow large sums of money. Simply put, borrowing helps to pay for the infrastructure or capital improvements integral to the provision of basic services when local governments do not have sufficient cash on hand. Succinctly put, local governments must borrow substantial sums of money to “stretch” their limited financial resources to accommodate the service needs and expectations of their citizens. Most of the money that these governments borrow is in the form of long-term obligations. Since 1982, there has been a significant increase in long-term debt for four of the five types of local governments (the exception being townships), with the largest increases recorded for municipalities and school districts. Yet, in spite of borrowing larger amounts of money over time, the ratio of borrowed money to both OSR and total revenue has remained remarkably steady, with local government borrowing activity tending to slow down during downturns in the economy. Could the COVID-19 pandemic-driven recession and ensuing double-digit inflation cause local government officials to continue their much more cautious approach to borrowing in the foreseeable future?
