Intergovernmental Relations:

Changing Patterns in State-Local Finances

HRD-92-87FS: Published: Mar 31, 1992. Publicly Released: May 1, 1992.

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Pursuant to a congressional request, GAO provided: (1) information on state and local governments' fiscal problems; and (2) data on aggregate state and local government revenues, expenditures, and related variables over the 30-year period from 1961 to 1990.

GAO found that major trends in state and local government finances include: (1) record high deficits in financing current service operations; (2) expenditures increasing at a faster rate than revenues; and (3) growing state and local tax burdens. GAO also found that: (1) although federal, state and local governments continue to share the burden of financing federal social service programs, state and local governments have assumed a greater portion of the burden for financing other public consumption and interest programs; (2) health care spending is the most rapidly growing area in state and local budgets; and (3) real cash assistance and capital investment spending levels have been virtually flat over the past 30 years. In addition, GAO found that: (1) growth in intergovernmental revenues received by state and local governments from the federal government leveled off, and have declined as a percentage of both gross national product and state and local revenues; (2) intergovernmental revenues have shifted toward Medicaid and away from other such areas as transportation, job training, and community and regional development; (3) revenues from personal income and general sales taxes have been the most rapidly growing source of state and local revenues, and revenues from corporate income and excise taxes have increased the least; and (4) although local property tax revenues declined, they have begun to steadily increase.

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