**GAO-07-1080SP**                      Published: Jul 18, 2007. Publicly Released: Jul 18, 2007.                  

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## Highlights

For over a decade GAO has run long-term simulations showing that absent a change in policy, the combined effects of demographic changes and growing health care costs drive ever-increasing federal deficits and debt levels. The Comptroller General has repeatedly warned that the current fiscal path of the federal government is "imprudent and unsustainable". State and local governments provide an array of services to their residents, and the federal government relies on these governments to assist in the realization of national goals. State and local governments also rely on federal grants to varying extents. These subnational governments may also face fiscal stress. To provide Congress and the public with a broader national context, GAO has developed a fiscal model of the state and local sector. The GAO state and local model projects the level of receipts and expenditures of the sector in future years based on current and historical spending and revenue patterns. In the "base case" model we assume that the current set of policies in place across federal, state, and local governments remains constant. The primary data source for the model is the National Income and Product Accounts. The timeframe for the simulations parallels that of our federal fiscal model--the simulations extend until 2050. The state and local model examines the aggregate fiscal outcomes for the sector and does not examine the condition of any individual state or local government.

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## Topics

Government Operations

Balanced budgetsBudget administrationBudgetingBudgetsEconometric modelingEconomic analysisstate relationsFiscal policiesHealth care cost controlHealth care costsIntergovernmental fiscal relationsLocal governmentsProjectionsState budgetsState governments