- Rising interest rates are squeezing cash-strapped towns and school systems that use short-term borrowing to keep cash flowing while they wait for property tax dollars to come in.
- Short-term borrowing cost almost nothing and offered an easy solution for places with limited reserves and slow-to-arrive revenues.
- Municipalities generally issue several billion dollars in short-term debt a month to cover day-to-day expenses.
- Some towns, counties and school systems have pulled back on these loans as rates have shot up.
- Federal pandemic aid and strong revenues over the past several years are also helping some municipalities avoid borrowing.
WSJ — Business — Budgets — Interest Rates — Municipalities — Inflation
New Threat to Town, School District Budgets: Rising Rates
Rising interest rates are squeezing cash-strapped towns and school systems, leading to higher taxes and cuts in services. Some municipalities are avoiding borrowing by using federal pandemic aid and strong revenues.