ABSTRACT:This article examines the effect of various state government regulatory, oversight, and assistance programs on the level of local government borrowing for a national sample of 2,087 communities with over 10,000 persons. Both traditional debt limits and referenda requirements and other state programs regulating or assisting local government borrowing are analyzed in a model of local debt choice. State‐imposed local debt limits do appear to have a depressing effect on communities' debt levels. Of the other programs reviewed it appears that active rather than legislative state oversight and assistance activities have the greatest influence on the use of local debt. It is also concluded that future research should concentrate on the relationship between the borrowing activities of local governments and the variety of special districts that exist in metropolitan area