GAO reports economic crisis worsening for states

State and local governments are facing even greater
budget deficits than were expected a few months ago, according to a new study
released Monday by the Government Accountability Office (GAO).

GAO estimates that state and local governments will face
a cumulative operating deficit of $131 billion in 2009. Deficits are set to
mount in 2010, with the GAO predicting a cumulative deficit that year of $181
billion.

{mosads}“The current results represent a significant
deterioration from our November 2008 update,” according to a GAO letter to
Sens. Max Baucus (D-Mont.) and Chuck Grassley (R-Iowa). “In November, our model
depicted an operating deficit in the $100-$200 billion range.”

The new report comes as Congress weighs an $825 billion
fiscal stimulus package that includes several efforts to bolster state and
local governments through government spending on Medicare funding and
infrastructure, as well as on tax breaks.

The House is set for a vote on the stimulus package on
Wednesday, and three congressional panels passed their portions of the package
last week. Republicans have criticized Democrats for making the process too
partisan, while also arguing that the package does not include enough tax
breaks. House Minority Leader John Boehner (R-Ohio) on Sunday vowed to oppose
the plan this week.

The Senate Finance and Appropriations committees are set
for markups of their portions of the bill on Tuesday.

“Since most state and local governments are required to
balance their operating budgets, the declining fiscal conditions shown in our
simulations suggest that, without intervention, these governments would need to
make substantial policy changes to avoid growing fiscal imbalances,” according
to the GAO report.