Kent State Faculty Members Research Native American Governments’ Borrowing Costs

Serena Loftus and R.Z. Zhang
KENT, Ohio – Research conducted by two Kent State accounting faculty members has shown that tribal governments pay 22% to 87% higher borrowing costs on municipal bonds (government borrowing) compared to state and local entities.

Serena Loftus, Ph.D., and R.Z. Zhang, Ph.D., both assistant professors of accounting at the Ambassador Crawford College of Business and Entrepreneurship, along with colleague Sarah Shonka McCoy, Ph.D., assistant professor of accounting at the University of New Mexico’s Anderson School of Management, recently presented their study, “Native American Governments’ Borrowing Costs: Evidence from Municipal Bond Markets,” at the 11th Annual Municipal Finance Conference hosted in July by the Brookings Institute.

According to Loftus, the current tax code allows for the issuance of tax-exempt debt by state, local and tribal governments. Tax-exempt debt is more attractive to lenders, who are willing to accept lower interest payments because they do not pay federal taxes on this interest. This aspect of the tax code makes borrowing more affordable for governments. However, the current tax code places limitations on tribal governments that are not present for state and local governments. These restrictions make it more difficult for tribal governments to issue tax-exempt debt, and this research study shows that tribal governments are less likely to borrow using tax-exempt debt than state and local governments.

The restrictions have been criticized in the U.S. House and Senate, and by the Treasury Department. Several legislative acts have attempted to remove these restrictions on tribal governments. Recent examples include the Build Back Better Act of 2021 and the Tribal Tax and Investment Reform Act of 2021. However, none of these acts have been passed into law.

“Our research offers timely, comprehensive, and independent evidence that tribal governments’ access to tax-exempt debt is limited relative to state and local governments,” Loftus said. “Our research further shows that when tribal governments overcome these additional restrictions to issue debt, they pay higher interest rates than state and local governments.”

Tribal governments have significant unmet capital needs, and this shortage of funds hampers the economic development of their communities. Like state and local governments, tribal governments can fund operations and finance capital projects by issuing municipal bonds. 

“Our research investigates the borrowing costs for tribal governments, and our results, based on a sample of municipal bonds issued by tribal governments from 1992 to 2021, indicate that tribal governments pay significantly higher interest rates on their debt than comparable state and local governments,” said Zhang. “High interest rates reduce the benefits of borrowing, with the result being that money spent paying interest is not used for projects that could facilitate economic development.”

A future area of research for the team is seeking a better understanding of the finance landscape for tribal governments. They are currently collecting data from various sources to better understand factors that could impact tribal governments’ access to capital and cost of borrowing.

“The College is committed to advancing the United Nations’ Sustainable Development Goals. We know that access to affordable capital is critical for achieving so many of these goals, including economic growth and resilient infrastructure,” Loftus said. “Our research speaks directly to these topics and shows that not all governments in the United States have access to affordable borrowing under the current tax code.”


Kent State University’s Ambassador Crawford College of Business and Entrepreneurship is among the fewer than 1% of business schools worldwide to obtain dual accreditation from the Association to Advance Collegiate Schools of Business (AACSB) in both business and accounting. The college offers 11 undergraduate majors, 14 minors, four graduate certificates, an undergraduate Professional Sales Certificate program; master’s degrees in accounting (online), MBA (in-person and online), business analytics (in-person and online) and economics; as well as a Ph.D. program with concentrations in accounting, finance, information systems, management and marketing. For more information about Kent State’s Ambassador Crawford College of Business and Entrepreneurship, visit


POSTED: Tuesday, August 16, 2022 11:12 AM
UPDATED: Friday, February 23, 2024 10:16 PM