Study: More Corrupt States Have Higher Public Debt

The link between corruption and debt is particularly prominent for private projects, such as stadiums.

by Mike Maciag, Governing Magazine,  January 24, 2017

Corruption might not just land politicians in jail. It could also cost taxpayers more money.

According to new research published in the journal Public Administration Review, states with more public corruption convictions have greater levels of government debt. Fighting corruption, the authors argue, can help governments limit debt and lower the higher borrowing costs they're subject to.

“Public corruption is far from a victimless crime. It costs money,” said John Mikesell, an Indiana University professor who co-authored the study.

Researchers found that the 10 most corrupt states would have owed an average of 9 percent less, or $249.35 per capita, if they cut levels of corruption to the 50-state average.

A link between public debt and corruption may exist for a number of reasons. Compared to operating budgets, issuance of debt typically isn’t as closely scrutinized. And, the report authors say, stealing a fraction of money from a large deal is often more profitable than siphoning dollars from a single line item in the budget.

From 1977 to 2008, the study found the relationship between corruption convictions and debt to be strongest for long-term debt issued for private purposes. Debt issued for private purposes typically involves more private-sector players, opening up more opportunities for corruption. For instance, deals involving private parking garages or stadiums -- where profits are a major consideration -- are more ripe for corruption than construction of new schools, said Mikesell.

read … Governing

STUDY: Corruption and State and Local Government Debt Expansion 

Hawaii

Total Debt Outstanding (per capita)1977–2008

• 43rd (8th highest debt)
• $3,382.48 per capita

Corruption (per public employee) 1977–2008

• Hawaii Ranks 27th (NOTE:  This is based on actual convictions for corruption.  In Hawaii corruption normally results in promotions, not convictions—especially during 1977-2008 period.  Shall we make a list?)