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GAO-16-260SP 1 (2015-12-16)

handle is hein.gao/gaobaajml0001 and id is 1 raw text is: GAO STATE AND LOCAL GOVERNMENTS' FISCAL OUTLOOK 2015 Update The state and local government sector continues to face fiscal challenges Simu atand Lwhich contribute to the nation's overall fiscal challenges. As shown in Fiscal sustainability presents a figure 1, GAO's simulations suggest that the sector could continue to face national challenge shared by all levels a gap between revenue and spending during the next 50 years, and that of government. GAO simulations of state and local governments would need to make substantial policy long-term fiscal trends in the state and changes to avoid these fiscal imbalances in the future. The simulation local government sector-published assumes that the tax structure is unchanged in the future and that the since 2007-ave consistently shown provision of real government services per capita remains relatively that state and local governments face constant. Figure 1: State and Local Simulated Operating Balance Measure, as a Percentage of Gross Domestic Product (GDP) Percentage of GDP SI onbegins o -2 -4 Positive balance Negative balance ... . . m - . . 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 Year Operating balance sources GAO calculations using Bureau of Economic Analysis data and GAO sim ations, updated December 2015 I GAO- 16260SP Notes: Historical data from 2005 to 2014 are from Bureau of Economic Analysis's (BEA) National Income and Product Accounts (NIPA). GAO's simulations are from 2015 to 2064, 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 recessions, as indicated by their reported total balances, which are composed 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-16-260SP

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