Does Local Government Autonomy Promote Fiscal Sustainability? Lessons from Illinois

Since the implementation of its 1970 Constitution, Illinois has granted home rule to any municipality with a population exceeding 25,000 and allowed municipalities below that population threshold to adopt home rule by referendum. In Does Local Government Autonomy Promote Fiscal Sustainability? Lessons from Illinois's Home-Rule Municipalities, Matthew Walshe studies the question of whether the local government autonomy conferred through home rule promotes fiscally sustainable policies. A difference-in-differences estimation shows that home rule enlarges the public sector but improves operating surpluses. There is no evidence that home rule causes an increase in the debt burden, although it does cause a marked substitution of general obligation bonds for other forms of debt instruments.