Debt and Deception: How States Avoid Making Hard Fiscal Decisions

Government borrowing occurs whenever the government forgoes control over some future flow of resources or benefits in order to acquire resources for current use. Based on this definition, the authors identify several ways that state governments borrow, which include widely recognized forms of debt as well as types of actions that are less transparent. Case studies for Connecticut, Illinois, and New York document the large amounts of future commitments that these states have taken on to cover operating deficits over the last decade. The authors conclude by evaluating the usefulness of current financial statements for assessing the amount of borrowing that states have done to support current services and suggest areas for which additional information is needed.