Article

Achieving Fiscal Sustainability for State and Local Governments

Robert B. Ward

in The Oxford Handbook of State and Local Government Finance

Published in print March 2012 | ISBN: 9780199765362
Published online September 2012 | | DOI: http://dx.doi.org/10.1093/oxfordhb/9780199765362.013.0033

Series: Oxford Handbooks

 Achieving Fiscal Sustainability for State and Local Governments

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Over the last decade, observers of state and local finances have been alarmed over an emerging picture of long-term, structural imbalances. This article examines the concept of fiscal sustainability in several formulations and explains that it essentially means limiting expenditure commitments to those that can be met by available revenue streams. It investigates why fiscal sustainability in actual practice, however it might be measured in theory, has fallen into disrepair. The usual lineup of budget-busting culprits is next examined, with the proliferation of entitlement programs standing at the head of the line. Over the past four decades, state and local budget increases reflected the strength of the economy during an unprecedented run of prosperity. Meanwhile, the array of entitlement programs that drove spending was increasingly shaped by political, demographic, and institutional forces, each with its own clientele of beneficiaries. That has made adjustments more difficult when revenues do not keep pace with spending patterns.

Keywords: local finances; fiscal sustainability; spending patterns; state revenue; institutional forces; beneficiaries

Article.  8727 words. 

Subjects: Economics ; Public Economics ; Macroeconomics and Monetary Economics

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