State and Local Finances: Some Jurisdictions Confronted by Short- and Long-Term Problems

GAO discussed the financial condition of state and local governments. GAO noted that: (1) from 1985 to 1991, state and local governments faced increased spending and revenue pressures; (2) certain programs, such as Medicaid, grew rapidly at the state level and public safety programs grew at the county level; (3) state and local governments have acted to control program growth, cut services, and raise revenues, and instituted spending cuts that affect government payrolls and capital projects; (4) some governments have less flexibility for funding services and incur budget deficits because spending continues to outpace revenues; (5) many cities with high poverty levels and low incomes do not have the capacity to finance police, fire, and other services because of their relatively low tax bases; and (6) the decline in state and local budget surpluses could reduce long-term economic growth.