Responsible fiscal management requires governments to pay for current operating expenses with current revenues rather than shifting those costs onto future taxpayers through long-term borrowing. Operating expenses include ongoing costs of providing public services, such as employee salaries and benefits, contractual services, supplies, and routine maintenance.
While debt is an appropriate tool for financing long-term investments in capital projects like roads, facilities, and transit systems, it should not be used to cover current-year operating expenditures when repayment extends beyond a single year. Borrowing for operations creates future debt service obligations without producing a corresponding long-term asset or benefit.
This principle is fundamental to maintaining a structurally balanced operating budget, in which recurring revenues are sufficient to cover recurring expenditures. Using borrowed funds to close operating budget gaps may provide immediate relief, but it does not resolve the underlying imbalance between revenues and expenditures. Instead, it adds principal and interest payments to future budgets, potentially worsening fiscal pressures and pushing current costs onto future taxpayers.
Governments may appropriately use short-term borrowing to manage temporary cash-flow shortages, such as when property tax revenues are received after operating expenses come due. Such borrowing should be supported by identifiable revenues and repaid within the fiscal year. This differs fundamentally from issuing multi-year debt to pay for current operations.
The Civic Federation
October 22, 2026