DISENTANGLING PATTERNS OF STATE DEBT FINANCING

We examine the determinants of change in state government indebtedness from 1961 through 1989 using a pooled time series cross-sectional ana lysis. The analysis reveals that debt is primarily a function of econo mic conditions reflecting both the need to borrow and the capacity of states to repay debt. However, political factors such as culture, part isan competition, and electoral cycles also affect state debt. We also find very weak evidence that tax and expenditure limitations, ironica lly, may increase state indebtedness, while constitutional debt limita tions have no effect upon slowing the growth of state debt.