Scoop and Toss: How To Keep the World's Most Expensive Ice Cream Cone from Collapsing.

INTRODUCTION 860 I. BUDGETS, BONDS, AND A MASTER CLASS IN AVOIDING RESPONSIBILITY 862 A. BUDGETS AND MUNICIPAL BONDS 862 B. WHAT IS SCOOP AND TOSS AND WHY IS IT A [...]
In the face of budgetary crises, state and local governments traditionally have two options--raise taxes to generate revenue or cut spending. However, some municipal governments choose another route. Instead of paying the immediate political price associated with higher taxes or cuts to government aid, these municipalities issue bonds, using debt to fill gaps in the budget. The officials creating this debt are typically not the ones responsible for its repayment. Often, a municipal bond is not due for twenty to thirty years after it is issued. For state and local officials, the obligation to repay bonds issued under a predecessor can be a difficult pill to swallow, leading some to engage in "scoop and toss" refinancing. Scoop and tossing allows officials to scoop up a municipality's expiring bonds and toss the burden of repayment into the future, preferably onto the shoulders of a successor. The maneuver involves issuing new bonds to pay off expiring bonds--using new debt to pay off old debt--akin to using a new credit card to pay off an old credit card. In doing so, the government can create short-term flexibility by taking the money originally set aside to pay off the debt and using it elsewhere in the budget. However, all debt must be repaid, and scoop and tossing only delays the inevitable while adding to a municipality's tab. The rise of COVID-19 has also brought an increase in scoop and tossing. Facing repayment deadlines and the demands of a pandemic, municipal governments across the country have chosen to toss the burden of repayment into the future. What effect these decisions will have on state and local budgets going forward is unclear. This Comment asserts that changes to the current state and federal regulatory frameworks are needed to limit scoop and tossing, as any short-term flexibility afforded by the maneuver is outweighed by the need for long-term budgetary stability. In addition, this Comment advocates for greater public involvement in municipal budgets as a way to increase political accountability and decrease the use of short-sighted measures like scoop and tossing.