GAO Warns on Long-Term State, Local Fiscal Imbalance
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GAO Warns on Long-Term State, Local Fiscal Imbalance

The U.S. Government Accountability Office recently issued its latest state and local government fiscal outlook, which suggests a growing gap between revenues and expenditures over the coming decades that will increasingly squeeze budgets and force difficult fiscal trade-offs. In a new commentary, I write:

In recent years, state and local governments have largely remained in a fiscal holding pattern, continuing a slow recovery from the impacts of the Great Recession. Overall, state revenues have continued to slowly increase for the fifth straight year off of their FY 2010 lows, and relatively few states are currently contending with major budget deficits, in contrast to the years immediately following the onset of the recession. Local governments have lagged behind the states, with cities and counties only recently starting to see some recovery.

While the short-term fiscal trends now appear to be moving in a positive direction at both levels of government, the Government Accountability Office (GAO) offered a more dire long-term outlook in the December 2014 edition of its State and Local Governments’ Fiscal Outlook. The report found that states and local governments will continue to face long-term fiscal challenges, with a growing gap between revenue and spending through the year 2060, absent significant policy changes.

GAO attributes the long-term fiscal challenges primarily to “the rising health-related costs of state and local expenditures on Medicaid and the cost of health care compensation for state and local government employees and retirees.”

Read the rest of the commentary here.