Given the nature of the partnership among levels of government in providing services to Americans and the economic interrelationships among levels of government, the U.S. Government Accountability Office (GAO) believes it is important for federal policymaking to understand potential future fiscal conditions of the state and local government sector. To provide Congress and the public with this broader context, the GAO recently released a report, State and Local Governments: Growing Fiscal Challenges Will Emerge during the Next 10 Years. This report describes a fiscal model of the state and local sector and provides simulations of the state and local government sector’s long-term fiscal outlook, an analysis of the underlying causes of potential fiscal difficulties for the sector, a discussion of the extent to which the long-term simulations are sensitive to alternative assumptions, and an examination of how the state and local government sector could add to future federal fiscal challenges. To develop these long-term simulations, the GAO developed a state and local model that projects the level of receipts and expenditures of the sector in future years based on current and historical spending and revenue patterns. The model shows that in less than a decade the state and local government sector will begin to face growing fiscal challenges. The GAO projects that, absent policy changes, state and local governments will face an increasing gap between receipts and expenditures in the coming years. Since most state and local governments actually face requirements that their operating budgets be balanced or nearly balanced in most years, the declining fiscal conditions the simulations suggest are viewed by the GAO as foreshadowing the extent to which these governments will need to make substantial policy changes to avoid potential growing fiscal imbalances.
The GAO’s report is available in full at http://www.gao.gov/new.items/d08317.pdf |
