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The U.S. Government Accountability Office’s (GAO) year-end review of the fiscal health of states and local governments paints a grim picture for 2019.
The GAO says states "will have [an] increasingly tough time covering their bills over the next 50 years. Fiscal sustainability presents a national challenge shared by all levels of government."
Calculation - Operating - Balance - Measure - Sector
Its calculation is based on the operating balance – a measure of the sector's ability to cover its current expenditures out of its current receipts.
Updated every year since 2007, the report, "State and Local Governments' Fiscal Outlook: 2018 Update, GAO-19-208SP," captures revenue and spending patterns and how they are impacted by government policies. Since 2007, GAO has published simulations of long-term fiscal trends in the state and local government sector, which have consistently revealed long-term fiscal pressures and near-term operating deficits.
Report - Revenue - Spending - Patterns - Revenues
In 2018, the report surveyed revenue and spending patterns and suggests that revenues "may be insufficient to sustain the amount of government service currently provided."
Although GAO’s long-term outlook is based on historical spending and revenue data as well as the Congressional Budget Office’s (CBO) Gross Domestic Product (GDP) projections, the factors that influence the long-term can also have near-term effects, Michelle Sager, director of Strategic Issues at GAO, told Watchdog.org.
CBO - GDP - Rate - Percent - Rate
In 2019, the CBO expects real GDP to continue to grow at a rate of 2.4 percent, less than 2018’s rate of 3.1 percent.
Sager points to key factors to watch in 2019, including overall economic trends nationwide, costs of health care growth, effects of federal tax changes, and a U.S. Supreme Court ruling on state sales taxes. GAO also identified federal policy changes that could affect the state and local government sector's fiscal outlook, specifically the effects of the recently enacted Tax Cuts and Jobs Act and how...
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