In the past few years, financial conditions for state and local governments have stabilized, but progress has been limited. While challenges remain, officials have been taking steps to replenish rainy day funds and address long term structural imbalances.
The National Association of Counties (NACo), National Governors Association (NGA), National Conference of State Legislatures (NCSL), Government Finance Officers Association (GFOA) and other organizations representing public sector officials and employees recently published a joint report detailing the fiscal conditions of state and local governments across the country. The report provides a snapshot of state and local finances, state and local pensions, federal intervention, municipal bonds, types of debt and default, and federal tax reform.
According to the report:
Counties still face a constraining fiscal environment many years after the national economic downturn. Forty-four (44) percent of county offi cials responding to a 2016 NACo survey indicated a reduction or elimination of a county program or service because of budget constraints or unfunded state and local mandates in the past fiscal year. Notably:
- Nearly three-quarters (73 percent) of states have escalated the number and/or cost of mandates for counties over the past decade, decreased state funding to counties over the past decade, or a combination of both.
- Property taxes and sales taxes are the main general revenue sources for most counties. According to a 2016 report published by NACo, all 45 states which allow counties to collect property taxes place limitations on their ability to do so.
- In 35 of the 45 states with county property tax authority, counties retain less than 30 percent of the property tax collected state-wide.
- Only 29 states authorize counties to collect sales taxes.
- Out of the 29 states, 26 impose a sales tax limit and 19 ask for voter approval.
STATE AND LOCAL PENSIONS
Although some state and local government pension trusts are fully funded with enough assets for current pension obligations, there are legitimate concerns about the extent of underfunding in certain jurisdictions. In most cases, increases in contributions, or modifi cations to employee eligibility, or both, will be suffi cient to remedy the underfunding problem.
Read the full report for more information.