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GAO-11-495SP 1 (2011-04-06)

handle is hein.gao/gaobabmki0001 and id is 1 raw text is: United States Government Accountability Office GAO STATE AND LOCAL GOVERNMENTS' FISCAL OUTLOOK April 2011 Update GAO's State and Local The state and local government sector continues to face near- and long- Fiscal Simulations term fiscal challenges that grow over time. The fiscal challenges confronting the state and local sector add to the nation's overall fiscal Fiscal sustainabilityN presents a difficulties. Although the sector's near-term fiscal picture has improved slightly since our March 2010 update, the economic downturn has created an unprecedented fiscal situation for states as revenues declined in GAO) has published lon-termi tandem with the economy. As we have reported in previous model local govelunment sector. These updates, and as shown in figure 1, the sector faces long-term fiscal silmulations show that, like the challenges that grow over time. The model's simulations show that the federal giovernment, the state and fiscal position of the sector will steadily decline through 2060 absent any local sector faces, persistent ad policy changes.' long-terml fiscal pres'sures. Using the Bureau of Economic Figure 1: State and Local Operating Balance Measure, as a Percentage of Gross Analysis's National Income anid Domestic Product Product Accounts (NIPA) as the primiy dat source, GAo's model Percentage of GDP pro ,jects the level of receipts anld 6 expen ditures for. th e sector unI til 2060 based on current and 4 historical Spending an1d revenue Surplus patterns. GAO assumes th- current 2 (Positive balance) set of policies inl place across0 federal, state, and locatl0 g'overl nmlents relmins conlstanlt. -aa mm - a a -maia -ena Deficit term fiscal outlook for the state -4 (Negative balance) and local ooector as0aowhole and, whil themode inorpoatesthe -6 Congoressionlal Budgetl Office's 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 (CB11) econmilc projectionls, Year adjustmentils are ma1.de to capture . . . . Operating balance April 2011 Source: GAO simulations, updated April 2011. e mm l Note: Historical data are from the Bureau of Economic Analysis's National Income and Product covers the sector inl the Accounts (NIPA) from 1980 to 2009. Data in 2010 are GAO estimates aligned with published data aggoregate, the fiscal outcomes where available. GAO simulations are from 2011 to 2060, using many Congressional Budget Office (CBO) projections and assumptions, particularly for the next 10 years. Simulations are based on localities cannt be .;ptred. current policy. This produt is pat f )(1 a boy of Since most state and local governments are required to balance their orkon the nation's lon-term operating budgets, the declining fiscal conditions shown in our fiscal challenges. Related simulations suggest that these governments would need to make products can be found at substantial policy changes to avoid growing fiscal imbalances. That is, For more information, contact Stanley J. Czerwinski at (202) 512-6806 or 'The operating balance is a measure of the sector's ability to cover its current expenditures czerwinskisagao.gov or Thomas J. out of current receipts. The operating balance measure is all receipts, excluding funds used MoCool at (202) 512-2700 or for long-term investments, minus current expenditures. To develop this measure, we mccooltagao.gov. subtract 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, we exclude capital-related expenditures from spending. GAO-11-495SP

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