State and Local Governments' Fiscal Outlook: 2014 Update

GAO's State and Local Fiscal Simulations

Fiscal sustainability presents a national challenge shared by all levels of government. Since 2007, GAO has published simulations of long-term fiscal trends in the state and local government sector. These simulations have consistently shown that state and local governments face long-term fiscal pressures. Absent any policy changes, the sector will face an increasing gap between expenditures and receipts in future years. Closing this gap will require state and local governments to make policy changes to assure that receipts are at least equal to expenditures.

GAO's model uses the Bureau of Economic Analysis's National Income and Product Accounts as the primary data source and presents the results in the aggregate for the state and local sector as a whole. GAO's model shows the level of receipts and expenditures for the sector until 2060 based on current and historical spending and revenue patterns. The model assumes that the current set of policies in place across state and local government remains constant to show a simulated long-term outlook.

The model incorporates the Congressional Budget Office's economic projections. These projections capture near-term cyclical swings in the economy. Because the model covers the sector in the aggregate, the fiscal outcomes for individual states and localities cannot be captured. This product is part of a body of work on the nation's long-term fiscal challenges. Related products can be found at http://www.gao.gov/fiscal_outlook/state_local_fiscal_model/overview#t=2.

For more information, contact Michelle Sager, 202-512-6806 or sagerm@gao.gov, or Oliver Richard, 202-512-8424 or richardo@gao.gov.