Debt limits' end

Debt is a major tool funding American local governments. Local governments are, however, severely constrained in their ability to rely on this vital tool. For over a century now, state constitutions and statutes have strictly curbed local governments' power to issue debt. The effectiveness of these legal restrictions has often been questioned, but the rationale for their existence has not been doubted. This Article presents the first systematic appraisal of the justifications offered for the limits state laws place on local indebtedness. It finds all the varied normative accounts lawmakers and commentators provide glaringly lacking. Even the most prevalent explanation-portraying debt limits as alleviating the inter-generational conflict between current residents who borrow money and spend it, and future residents who must repay the loans-is inconsistent with the economics of public finances and the laws of local government. After exposing the flaws of this and all other normative ends heretofore assigned to debt limits, the Article uncovers the sole end that may be attributed to them. Debt limits, it establishes, institute a degree of inter-municipal equity in access to credit, ensuring that one municipality does not deplete credit markets to the detriment of other municipalities located within the same state. But although debt limits do thereby serve an end, that lone normative benefit they generate is found to be of meager proportions. The limits therefore often represent unwarranted, costly- and deleterious-legal interferences in local finances. This Article's novel analysis should hence lead, if not to debt limits' abolition, then at least to their redesign so that their form corresponds to their inescapably limited end identified here.