Decades into the local news crisis, it’s well established that growing news deserts mean fewer reliable sources of information for local residents. But, according to a study published Wednesday, it can also mean extra costs for local governments to the tune of $1.1 billion.
The study, conducted by Rebuild Local News director of research Matthew Baker and University of Illinois Chicago associate professor of finance Dermot Murphy, found that local governments in news deserts across the nation collectively spend an extra $1.1 billion on municipal borrowing costs every year. Those costs then get passed down to local residents in the form of higher taxes or cuts in services.
The research builds upon a 2020 peer-reviewed study that found that lenders to local governments in news deserts tend to ask for higher interest rates because they know that the government is not being monitored by local journalists.
“There’s a lot of research out there already showing that unmonitored local governments — they tend to be more wasteful, and they tend to be more inefficient,” Murphy said. “So if you’re going to be lending to an inefficient or wasteful government, then you’re a little bit more nervous about doing that — just like how you’d be nervous about lending to somebody with a low credit score — and so you would have to ask for a higher interest rate as compensation.”
That 2020 study was a landmark in the local news research space because it established for the first time a quantitative impact of the loss of local news, said Baker. He and others at Rebuild Local News, a nonprofit that advocates for policy solutions to the local news crisis, discussed using the study and more up-to-date bond issuance data to calculate the current impact of news deserts. So Baker reached out to Murphy, a co-author on the 2020 study, late last year to do a follow-up.
The two found negative impacts in almost every state, with the scale changing depending on the size of the state’s news deserts and its reliance on the municipal bond market. Local governments in news deserts in New York, Texas and Alabama spent the most on extra borrowing costs, respectively spending $152 million, $132 million and $104 million per year.
Those figures could be an underestimate since Baker and Murphy used news desert data from 2020. Though their data is based on Editor and Publisher yearbooks, the State of Local News Project — which has its own system of tracking news deserts and is currently housed at Northwestern University — has found that the United States has lost roughly 1,300 newspapers since the end of 2019.
The study also only identifies costs incurred from higher interest rates on municipal loans. It notes that the $1.1 billion figure does not include costs from higher government spending, increased corruption and misconduct or lower voter participation and civic engagement in news deserts.
One potential area of hope is the rise of digital outlets. The study defines news deserts as areas with zero local newspapers. When Murphy first started working on his previous study a little under a decade ago, he and his colleagues looked into the possibility that digital outlets could replace newspapers but found that most of them were either repackaging national news or repackaging the work of other local journalists.
“Now, 10 years have since passed, and I feel like you’re starting to see the emergence of good organizations that actually do useful, boots-on-the-ground reporting,” Murphy said.
The study — and Rebuild Local News’ accompanying press release promoting it — champion potential legislative solutions to address the $1.1 billion in extra borrowing costs. One of those is the Local Journalism Sustainability Act, which was introduced in the House of Representatives in 2021, to provide newspapers payroll tax credits for hiring local journalists.
The act’s estimated annual cost was $340 million, a third of the $1.1 billion that would theoretically be saved if news deserts were eliminated. The study notes a more expansive program costing $900 million could support roughly 15,000 new reporters, which would translate to every news desert county receiving, on average, seven to eight journalists.
“If the $900 million subsidy reversed the $1.1 billion in incremental borrowing costs, then the subsidy would generate a return on investment of 22.2%, even without accounting for the additional benefits of robust news coverage in local communities,” the study states.
Baker said that in conducting the study, he and Murphy went beyond looking at the national impact to examining state-level effects, in part because that’s where legislation supporting local news is gaining traction. New Mexico, for example, passed into law earlier this year legislation that gives local news outlets tax credits for hiring and retaining journalists.
“While I think the aggregate figure does certainly lend support to the federal case, I think we’re not just focused on using this type of work for that alone,” Baker said. “I think there’s a lot of really valuable insight that this also lends to our state-level work.”
