Moore: Local journalism continues to dwindle in Arkansas and beyond, and this is impacting more than just the news industry. A 2020 report demonstrates that the loss of local newspapers leads to higher municipal borrowing costs for local governments. That uptick can be as high as hundreds of thousands of dollars per loan. Dermot Murphy is a professor of finance at the University of Illinois Chicago and one of the authors of the study. Murphy says he and his co-authors started on this work in 2018.
Murphy: We were seeing a lot of articles that were talking about the state of the local newspaper, and we thought that, you know, it came across to us that local media is really declining, right? There's fewer statehouse reporters. People aren't subscribing as much newspapers anymore. And the closures are becoming increasingly common. And so since we are a finance professor, so we thought we would take the finance angle.
Is this costing municipalities money is what we initially asked because we thought, well, there's a lot of articles out there about more government waste, more corruption, because local media is not watching the local government, they act as a very crucial watchdog, essentially. And so if nobody is covering your local government, then on average there is an increased likelihood of waste and corruption.
And so local governments, they have to finance crucial infrastructure: schools, hospitals, water systems, etc. And so it's very common for local governments to access the municipal bond markets, to borrow money to fund that infrastructure. Now, when they borrow that money, they have to pay interest on that loan essentially over time. And so the market ultimately determines what interest rates they should pay.
And so just like with household finance, if they think that you are not a trustworthy borrower, then they're going to charge you a higher interest rate. It's the same sort of idea behind a credit score. If you have a low credit score, then you will have to borrow at a higher interest rate just to compensate the lender for the risk, like the risk that they're exposed to by borrowing, lending to somebody with a low credit score. And so the market ultimately thinks, well, this, we understand this government to be inefficient and wasteful and possibly corrupt. So if we're going to lend to this government, we are going to charge a higher interest rate.
Moore: How are the lenders quantifying how risky it is? I mean, are they literally saying there's less local news coverage, therefore it's more risky?
Murphy: Not necessarily. Actually, I don't think the lender necessarily has to be aware that there's no local newspaper. They just have to be aware that this seems like a very opaque government that is getting away with things. And there are countless like anecdotal examples of local governments that they're not being watched. Maybe we don't know, they're not being watched, but we are certainly aware of their corruption or their inefficiency. So the lender doesn't necessarily have to be aware of a lack of a local newspaper, but it does show itself in these ways, such as corruption and waste, where the municipal lender might be aware of that. And that's why they charge the higher interest rate, essentially.
Moore: Murphy says this effect is not impacted by geography, partisanship or population. The data shows that regardless of rural or urban, conservative, liberal, northern, southern, the one consistent pattern was that when there was less coverage, there were higher borrowing rates.
Matt Baker is the director of research at Rebuild Local News, a nonpartisan nonprofit organization working to advance public policy to counter the collapse of local journalism and revitalize the industry.
Matt, for you as you are thinking about the impacts on the journalism side, how local does the local coverage really need to be?
Baker: I think that's an excellent question. I think the way that we think about it is as close to the communities as possible. You know, the issues that are close at heart to many people across the U.S. are often very common, but they manifest themselves in different ways. And so you need to have a sort of reporting infrastructure that is able to do that. But the more reporters you have at the more local communities you have, the better it's going to be for those communities.
And when we talk about economic costs, the study that we focused on, that Dermot worked with us on is a portion of probably a much larger economic impact of the loss of local news. The great thing about Dermot's work was it was able to quantify it with a great deal of precision and causally be able to say that like it wasn't some other confounding factor. It wasn't, you know, more urban, more rural or this or like they were poorer or richer. It was this loss of local news that was able to be uncovered as this lever that opens up, you know, the prospect of basically governments having to pay more money and in turn, ordinary people.
Moore: You make the point that a paper with two reporters covering everything isn't meaningfully different from a news desert in a newsroom. Two reporters covering anything, any specific topic feels like a luxury. Here in 2026.
Baker: I think that's fair. I think our point is that you, again, you need more reporters because the number of beats you can cover with two reporters is often much thinner than if you have more. And so, you know, when you're pressed thin, and I'm sure you and your colleagues know this all too well, and time is precious. The stories that you focus on, they may not be the ones that you would maybe have focused on if you had more time. And the type of journalism that I think this study really does kind of put a kind of laser focus on, is that whole idea of accountability, accountability journalism, holding governments and government institutions accountable for their actions. And often that is quite time consuming. And so you need more journalistic capacity and able to do that.
Moore: Well, you know, an argument could be made here that it is in the government's interest for local news reporters to be reporting on them. Is there any sort of idea of, you know, I know you've talked a little bit about kind of incentivizing local reporting, this sort of thing. Does the government have, you know, a benefit from incentivizing this sort of local reporting so that they are being better stewards of taxpayers money?
Baker: I think that case should probably be made, yes. I mean, it certainly is the case that based on this analysis alone, that there are real benefits to having local reporting to hold government accountable in that they will ultimately save money. But to be clear, I think there are a bunch of other types of economic impacts that government probably also has an interest in that local news has also have, you know, proven to have a positive relationship with, whether that's, you know, the mortgage lending rates, loan denials, financial misconduct cases like these are only three distinct cases that the literature has spoken about in the past couple of years, and yet they have real effects on ordinary people.
And in an ideal world, you'd have, you know, government being able to kind of track and monitor and also intervene in those cases. But sometimes that's not possible. And so I think there's also this idea that local reporting as well is serves as a public good in many of these cases. But the public good is not just a simple, wouldn't it be great and nice to have it? It has a real downstream economic impact on ordinary people when you have that capacity. And we're only starting to scratch the surface on like the extent and scope of what the economic impact is. But as you can see from this study alone, just on the face of it, in terms of aggregate numbers, but also across the country and individual states, it's a pretty substantial economic impact.
Murphy: I would add to that, like in economics, we sometimes call it the principal-agent problem. The agent is somebody you hire to do a job for you. And in the case of a local government, it's the citizens that are hiring a local government to do the job for them of managing public affairs, essentially. And so if it's well aligned, if the principal, if the agent is indeed acting on behalf of the principals, the voters, then they should care about having local news in their community to keep an eye on, like the politician that is hired by the citizens.
Now, sometimes there's a principal-agent problem where the agent is not necessarily doing the job correctly. So, I mean, corruption is never something that you want. Like the voters never want corruption. So that's where it gets tricky. You definitely want a newspaper in your community, but sometimes you do get local governments that would rather not be watched.
Moore: Yeah. Matt, maybe to that point, what are some ways that you think that local and state legislatures can think about making this a symbiotic relationship? There's some sort of legislation that can be brought forward to really kind of make this a thing that makes the place better for everybody in a way that benefits everybody too. Because, you know, local journalism is expensive. This is something you know all too well is it's expensive, it's time consuming, and it's hard to do it in a model that we have to pay for journalism right now. And so what are some ways that you think might benefit both voters, that principal, and the agent there, the politicians who are doing those jobs on behalf of the citizens?
Baker: Yeah. I mean, I think there's a range of different policy kind of tools you can use. I mean, they have different fiscal implications, of course. And one of the points of making of having this paper was to kind of also make the case that like some of these fiscal implications, you know, may not actually be as, you know, they may actually be subsidized by the benefit that you accrue by actually having local reporters. Right. So it's not just a question of spending the money and not getting any return. It's like, actually there is a return. And in this case, you can see in the municipal, you know, borrowing rates that governments have that you can save money.
But in terms of specific policies, you know, some of the tools that we're looking at that have been working quite well in a number of different states, things like employment tax credits. So this is where basically the government says we're going to help support either maintain or add another reporter to a local community. And it's never the whole salary, it's like a portion, which can be, you know, used by the newsroom to leverage with other subscriptions or with other sources of revenue to kind of make it work for them. And that's been a model that's worked successfully in Illinois. There's, it just was a bill passed this year in New Mexico as well. And that's, you know, we're talking often these programs are like millions of dollars a year, but millions of dollars a year in addition to some of these other revenue streams can make the difference for a newsroom to actually make the commitment to be like, we will add in one more journalist and to the earlier part of our conversation, one more journalist may not sound a lot, but actually it can add a lot of journalistic capacity.
Some of the other things that we've been exploring are things like government advertising set asides, which is a wonky way of saying the government spends money on advertising all the time. And it used to be the case that government would actually use local outlets, newspapers to actually put those ads in. Well, increasingly they don't do that anymore. They actually use other, you know, large platforms to place their ad dollars. And in some cases, that's maybe okay. But in some cases, maybe it's less good because you're not able to actually get that information in the hands of ordinary people. Think of like, you know, particular groups that have like, you know, speak different languages that aren't English, for example.
And so government set aside is actually a way of being able to leverage money that the government's already going to spend, but maybe putting it in the hands of, you know, local outlets that is going to produce the content and also share, you know, information that's important to them. So that's a model that's revenue neutral as well. It doesn't cost any extra money. It's actually just a way of reconfiguring the landscape to make sure that local news isn't at a disadvantage compared to some of these larger sort of tech platforms, for example. So those are just two very concrete ways.
The other one I'll just mention real quick is journalism fellowship programs. So these are worked in places like California, New Mexico and Washington state, and they basically add a postgraduate journalist into a newsroom to help support additional capacity. And those are, you know, relatively affordable types of interventions that can really add real value, especially in communities that we're talking about to that communities don't necessarily have any access or very limited access to local information and news.
Moore: Murphy says as a finance expert, he believes incentive programs like the ones Baker mentions are a good investment.
Murphy: I think the subsidies that are being proposed in these bills are reasonable, and I think that if they offset the cost that we're talking about in our study, it's just a massive return, I think, for the U.S. government, local governments and citizens really.
Ozarks at Large transcripts are created on a rush deadline and edited for length and clarity. Copy editors utilize AI tools to review work. KUAF does not publish content created by AI. Please reach out to kuafinfo@uark.edu to report an issue. The audio version is the authoritative record of KUAF programming.
