State and Local Finances: Some Jurisdictions Confronted by Short- and
Long-Term Problems (Testimony, 10/06/93, GAO/T-HRD-94-1).

As the nation begins to debate health care reform, welfare reform, and
other major policy initiatives in which state and local governments are
expected to play a key role, questions persist about the financial
condition of these governments.  GAO found that between 1985 and 1991,
state and local governments faced myriad spending and revenue pressures.
Most categories of programs were growing, but some programs grew more
rapidly, such as Medicaid at the state level and public safety at the
county level.  Although jurisdictions tried to curb program growth, trim
services, and raise revenues, spending continued to outpace revenues,
bringing year-end budget surpluses down.  Without such "budget
cushions," jurisdictions had less flexibility to fund services, and some
jurisdictions ended up with budget deficits.  These trends may improve
as the economy rebounds or as priorities change.  But many cities beset
with high poverty levels and low incomes face a more fundamental
long-term problem.  These jurisdictions have less capacity to finance
day-to-day police, fire, and other services because of their relatively
low tax bases.  Overall, the decline in state and local budget surpluses
could worsen the effects of the federal deficit on the economy,
potentially reducing long-term growth.  In GAO's view, the trends and
the differences in state and local financial conditions should be a part
of the discussions on major policy reforms now underway.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-HRD-94-1
     TITLE:  State and Local Finances: Some Jurisdictions Confronted by 
             Short- and Long-Term Problems
      DATE:  10/06/93
   SUBJECT:  Intergovernmental fiscal relations
             Local governments
             State governments
             Financial management
             Balanced budgets
             Future budget projections
             Budget deficit
             Economic growth
IDENTIFIER:  Medicaid Program
             Connecticut
             Tennessee
             California
             
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