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State and Local Fiscal Sustainability: The Challenges
Author(s) -
Chapman Jeffrey I.
Publication year - 2008
Publication title -
public administration review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.721
H-Index - 139
eISSN - 1540-6210
pISSN - 0033-3352
DOI - 10.1111/j.1540-6210.2008.00983.x
Subject(s) - revenue , sustainability , local government , fiscal sustainability , state (computer science) , capital expenditure , economics , public economics , fiscal imbalance , government (linguistics) , business , finance , fiscal union , economic policy , fiscal policy , macroeconomics , public administration , political science , ecology , algorithm , computer science , biology , linguistics , philosophy
At the state and local level, fiscal sustainability is the long‐run capability of a government to consistently meet its financial responsibilities. It reflects the adequacy of available revenues to ensure the continued provision of the service and capital levels that the public demands. After examining separate revenue and expenditure trends for state and local governments, this article identifies three specific sets of pressures that affect subnational fiscal sustainability—cyclical, structural, and intergovernmental. It then presents three specific examples of these pressures: Medicaid, pensions and retiree health benefits, and infrastructure. The author asserts that without changes in the fiscal system—in both revenues and expenditures—state and local fiscal sustainability will disappear. It concludes with some potential solutions but argues that the most difficult reform is to ensure that the public understands that there is no such thing as a free lunch.