No abstract

is an associate professor in the Department of Public Policy at the University of Connecticut. His primary areas of research are government fi nance, budgeting, fi nancial management and the design and implementation of citizen preference revelation and citizen participation mechanisms.

The authors use data on municipal bond sales in Oregon from 1994 to 1997 to explore whether population (as a proxy for financial-management capacity) and sale type (competitive or negotiated sale) influence interest rates. They find that smaller jurisdictions pay an interest cost penalty in the municipal bond market, and that competitive sales result in significantly lower interest rates compared to negotiated sales. The authors suggest that measures to enhance the financial-management capacity of small governments are warranted and that state laws requiring justification for negotiated sales are appropriate.

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.

No abstract