Local News Shortage Leads to $1.1 Billion in Extra Borrowing Costs for Local Governments and Taxpayers

The widespread decline of local news is not merely a cultural or democratic crisis. It is a major challenge to the fiscal health of state and local governments. In 2020, finance scholars Pengjie Gao, Chang Lee, and Dermot Murphy demonstrated that the loss of local newspapers leads to higher municipal borrowing costs for local governments, which ultimately trickle down to local residents via higher taxes or reduction in services. This report follows up on the original research to estimate how much more local governments in news deserts are paying in aggregate at the state and national levels. To arrive at these numbers, we use municipal issuance figures from the Municipal Securities Rulemaking Board, state-level estimates of the percentage of the population that lives in a news desert, and a weighted average 8.6 basis point “news desert” borrowing cost premium based on estimates from Gao, Lee, and Murphy. At the national level, we estimate that local governments in news deserts incur additional borrowing costs of $1.1 billion annually on their outstanding municipal bond issues.