State and Local Finances:

Some Jurisdictions Confronted by Short- and Long-Term Problems

HRD-94-1: Published: Oct 6, 1993. Publicly Released: Oct 6, 1993.

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Pursuant to a congressional request, GAO provided information on the financial conditions of state and local governments, focusing on: (1) the short-term financial conditions of states, cities, and counties; (2) state and local governments' responses to budgetary pressures; and (3) the long-term ability of states and localities to meet community service needs.

GAO found that: (1) between 1985 and 1991, state and local governments found it increasingly difficult to balance year-end budgets; (2) the economic recession, federal and state mandates, and increasing health care and social program costs have reduced state, city, and local revenues and increased fiscal pressures for community service and social programs; (3) reduced revenues have forced state and local governments to reevaluate their spending priorities, control program growth, cut services, and increase revenues through fees and taxes; (4) although current fiscal policies could improve state and local government short-term budgetary problems, many poorer jurisdictions are expected to have long-term problems in providing basic community services; (5) although fiscally sound state and local governments have been able to expand their services and programs, poorer jurisdictions will require subsidies equal to 36 percent of their tax revenues to finance services; and (6) poor jurisdictions face particular financial problems because of a declining tax base, industrial base deterioration, and middle-class suburban flight.

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