State officials often choose to borrow money to finance large expenses, such as expanding a congested highway or replacing defunct wastewater treatment plants. By distributing the cost of a large investment over many years, governments can free up cash on hand to meet their current day-to-day expenses. Borrowing for long-lasting infrastructure, primarily by issuing bonds, also spreads the cost over generations of taxpayers, enabling states to finance multiple pressing needs simultaneously. As debt financing continues to be an attractive option for states seeking to bolster aging public facilities, utilities, and services, it is important for policymakers to understand how much debt they can afford.
However, policymakers often lack…
