State and Local Finance : Increasing Focus on Fiscal Sustainability

Researchers in state and local finance have placed increasing focus in recent years on “fiscal sustainability,” the ability of governments to meet existing spending commitments with existing resources. The Governmental Accounting Standards Board (GASB), which establishes accounting and financial reporting standards for states and local governments, is considering setting standards in this area. This article analyzes recent history of states' expenditures and revenues as context for potential trends. It examines descriptions of fiscal sustainability that have been offered in previous literature and suggests a need for clear definition. The article discusses potential implications of action by GASB in this area, as well as developments in the economy and potential action at the federal level that may influence state and local budgets in the years ahead