GAO’s outlook for the States

April 11, 2012

Washington’s deficits are not the only fiscal ailment in the news these days. State and local governments have been hit hard by irresponsible economic assumptions and growing fiscal woes. Yesterday, the Government Accountability Office (GAO) held a webchat detailing their latest report on the fiscal outlook of state and local governments. The outlook is not optimistic.

According to the report, tax revenue from income and sales taxes are on the rise. However, flattening of property tax receipts show the housing market has not recovered. What is more troubling for state’s fiscal condition, however, is the increased costs in health care costs to states over the longrun.

The GAO report documents that the long term fiscal decline in the states is “primarily driven by the rising health-related costs of state and local expenditures on Medicaid and the cost of health care compensation for state and local government employees and retirees.”

Health care is not the only concern for states. Increases in pension liabilities present a second barrier towards state’s long-term investment capabilities. Furthermore, the evolution of the recent health care bill and last August’s debt ceiling deal could have unpredicted effects on state and local budgets.

How does your state fare? Check out our latest release of our State Fact Sheets here.

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