Fiscal Review Shows City and State Finances Improving

In the past few years, the fiscal conditions of state and local governments have stabilized, but improvements have been uneven, according to a new fact sheet issued by a group of associations representing state and local government agencies. The State and Local Fiscal Facts 2017 fact sheet highlights state and local finances, pensions, and municipal bonds. 

For states, 2016 brought a moderate improvement in fiscal conditions, and general fund spending is on track to grow modestly in 2017 for the seventh consecutive year. Fiscal improvement has been uneven across states due to declining energy prices, differing tax and spending policies, regional economic disparities, and changes in population and demographics. States also face rising spending demands and long-term budget pressures in areas including healthcare, education, infrastructure, and pensions.

City fiscal conditions are strengthening, driven by better-than-anticipated revenue growth and solid performance of ending balances. Factors most negatively influencing city conditions include increases in infrastructure demands and employee and retiree-related costs. Positive factors include the value of the city tax base, health of the local economy, and in most cities, the drop in gas and oil prices.

Counties still face a constraining fiscal environment, and nearly half of county officials responding to a 2016 National Association of Counties (NACo) survey indicated a reduction or elimination of a county program or service because of budget constraints or unfunded state and local mandates in the past fiscal year.

Although some state and local government pension trusts are fully funded with enough assets for current pension obligations, some areas are concerned about underfunding. In most cases, a modest increase in contributions to take advantage of compound interest, or modifications to employee eligibility and benefits, or both, will be sufficient to remedy the underfunding problem, according to the fact sheet.

For the full fact sheet, click here.