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Limited economic resources create constraints that force trade-offs among desired objectives. Likewise, state-balanced budget requirements force policy makers to make budgetary trade-offs among competing state programs. Constrained state resources have also encouraged states to issue bonds to finance infrastructure and capital assets rather than using pay-as-you-go financing for such investments. However, the expanded use of debt financing often faces another constraint known as debt capacity. As a result, states may be required to make trade-offs among the competing demands for debt financing similar to the trade-offs they must make for operating program expenditures. The authors' empirical findings indicate that tradeoffs occur between highway project—related debt and other state debt in those states with formal restrictions on total general obligation and revenue-backed debt (umbrella debt limits). In states without umbrella debt limits, there is no evidence of a trade-off between the highway debt and all other state debt.