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 fundinga multi-year lifeline for state and city coffersis 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 educationof which states and cities are by far the primary sourcesare 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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