August 21, 2014

GAO Highlights State and Local Fiscal Challenges

  • The American health care system is a patchwork of public and private programs that serve citizens in different ways, depending on their age, military...

While Washington continues to struggle with its budget problems, state and local governments face growing fiscal challenges as well. These challenges will likely add to the demands on the federal government in the years ahead, complicating the already difficult task of putting the country on a more responsible path.

“Fiscal sustainability presents a national challenge shared by all levels of government,” the U.S. Government Accountability Office (GAO) concludes in its latest update on the fiscal outlook for state and local governments.

Since 2007, the report says, GAO simulations “have consistently shown that, like the federal government, the state and local sector faces persistent and long-term fiscal pressures and, absent any policy changes, would face an increasing gap between receipts and expenditures in future years.”

The primary driver of the state and local challenges, the GAO says, is the projected growth in health-related costs – specifically, projected spending on Medicaid and health care for state and local government employees and retirees that will exceed U.S. economic growth.

Additional warnings about the fiscal difficulties facing state and local governments have come from the State Budget Crisis Task Force, a private bipartisan organization led by former New York Lt. Gov. Richard Ravitch and former Federal Reserve Chairman Paul Volcker, who also serves on The Concord Coalition’s Board of Directors.

Current tax and spending policies at lower levels of government, they say, simply cannot be sustained. Given such warnings, the public should encourage elected officials at all levels of government to pursue broad fiscal reforms.