Council on Foreign Relations – Why the Fiscal Health of States and Cities Matters

by Sabrina I. Pacifici on October 14, 2012

Why the Fiscal Health of States and Cities Matters, Jonathan Masters, Online Editor/Writer, October 3, 2012

  • “In the wake of the recent economic crisis, many statehouses and city halls face worrying fiscal stress that could have national ramifications. Federal stimulus funding—a multi-year lifeline for state and city coffers—is petering out before tax revenues fully recover and fo­rcing many sub-national governments to consider tax hikes and/or spending cuts that could slow recovery and, in some cases, undermine long-term growth. In particular, funding for infrastructure and education—of which states and cities are by far the primary sources—are under the budget knife. A particular concern for many sub-national governments is ballooning personnel costs, including public employee/retiree pensions and health care. In some acute cases, this financial burden has swept governments into bankruptcy protection; in others, broad changes in policy will be required in order maintain long-term solvency. And at the state level, the soaring costs of Medicaid threaten to crowd out other spending in the long term.”
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