Obligations of a State-Created Authority: Do They Constitute a Debt of the State

Although provisions in a number of state constitutions limit the amount of debt a state may incur state legislatures frequently have attempted to circumvent such limitations. Recent decades have seen increased use of the “authority,” set up by the legislature to accomplish a particular objective and given power to issue evidences of indebtedness to finance the objective, repayment to come from the revenues of the authority, with the declaration that the obligations of the authority are not those of the state. The enabling legislation has been challenged as unconstitutional, often on the ground that the obligations of the authority are in fact those of the state, thus creating a debt of the state. The courts have been obliged to determine the precise status of the authority’s long-term debts in order to ascertain whether the constitutional debt limitation has been violated.