State and Local Governments’ Fiscal Outlook: March 2010 Update, GAO-10-358, March 02, 2010
“In summary, this March 2010 update to our model shows that the state and local government sector continues to face near-term budget and long-term fiscal challenges which grow over time. Although the sectors near-term operating balance remains negative, increases in federal grants-in-aidlargely from the Recovery Actalleviated some near-term pressure. In the near-term, declines in the sectors fiscal position are attributable to several factors, including steep revenue declines. In the long-term, we project that the fiscal position will steadily decline through 2060 absent any policy changes. The decline in the sectors operating balance is primarily driven by rising health care costs. The fiscal challenges confronting the state and local sector add to the nations overall fiscal difficulties. Because most state and local governments are required to balance their operating budgets, the declining fiscal conditions shown in our simulations suggest the fiscal pressures the sector faces and foreshadow the extent to which these governments will need to make substantial policy changes and other adjustments to avoid growing fiscal imbalances.”
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