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GAO-15-224SP 1 (2014-12-17)

handle is hein.gao/gaobaainp0001 and id is 1 raw text is: UNITED STATES GOVERNMENT ACCOUNTABILITY OFFICE GAO STATE AND LOCAL GOVERNMENTS' FISCAL OUTLOOK 2014 Update GThe state and local government sector continues to face fiscal challenges S tatond which contribute to the overall fiscal challenges of the nation as a whole. Fiscal sustainability presents a As shown in figure 1, GAO's simulations suggest that the sector could nitinnqI chqlkPnnf. shired hv Al lp~vpls continue to face a gap between revenue and spending during the next 50 Figure 1: State and Local Simulated Operating Balance Measure, as a Percentage of Gross Domestic Product (GDP) Percentage of GOP -2 -4 *-- Projection begin Positive balance Negative balance ----------------------------------------------- ----------------- ------ 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 Year ..... Operating balance Sources: GAO calculations using Bureau of Economic Analysis data and GAO simulations, updated December 2014 1 GAO-15-224SP Notes: Historical data from 2005 to 2013 are from Bureau of Economic Analysis's (BEA) National Income and Product Accounts (NIPA). GAO's simulations are from 2014 to 2063, using many Congressional Budget Office (CBO) projections and assumptions, particularly for the next 10 years. The simulated operating balance is a measure of the sector's ability to cover its current expenditures out of current receipts. The simulated operating balance measure is all receipts, excluding funds used for long-term investments, minus current expenditures. To develop this measure, GAO subtracts funds used to finance longer-term projects-such as investments in buildings and roads-from receipts since these funds would not be available to cover current expenses. Similarly, GAO excludes capital-related expenditures from spending. While most states have requirements related to balancing their budgets, deficits can arise because of unanticipated events such as recessions. These deficits can occur because the planned annual revenues are not generated at the expected rate, demand for services exceeds planned expenditures, or both, resulting in a near-term operating deficit. States have tapped fiscal reserves to cope with revenue shortfalls during recent recessions, as indicated by their reported total balances, which are comprised of general fund ending balances and amounts in state budget stabilization rainy day funds. Figure 1 depicts the state and local simulated operating balance only, and does not include fiscal reserves or other budget measures used to cope with revenue shortfalls. GAO-15-224SP

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