About the Long-Term State and Local Fiscal Model

Using the National Income and Product Accounts prepared by the U.S. Bureau of Economic Analysis as a primary data source, our state and local model projects the level of receipts and expenditures for the sector in future years based on current and historical spending and revenue patterns. To develop these long-run simulations, we make projections for each major receipt and expenditure category of the state and local government sector in future years. We project the growth in each category of receipts and expenditures using CBO’s economic assumptions whenever possible. In several cases we were not able to obtain existing projections and needed to develop our own assumptions about the likely future growth path of certain receipts or expenditures. Key categories of receipts for state and local governments include several types of taxes (personal income, sales, property, and corporate), income on assets owned by the sector, and grants from the federal government. Categories of expenditures include wages and salaries of state and local employees, health insurance costs, pension costs, payments of social benefits (e.g., Medicaid and unemployment), depreciation expenses on state and local capital stock, interest payments on state and local financial debt, and other expenditures of the sector. Our model assumes current policies remain in place.

For additional information on the methodology used to create GAO’s State and Local Fiscal Model, see appendixes I-V of State and Local Governments: Growing Fiscal Challenges Will Emerge During the Next 10 Years [GAO-08-317]. This publication includes equations used in the model.