The State Fiscal Crisis

Research Report

The State Fiscal Crisis

August 1, 2003

Abstract

State governments play a critical role in the nation's fiscal and economic system. They collect revenues on the order of 6 percent of GDP, or roughly a third as much as the federal government. They have long been responsible for key government functions that affect long-term economic growth as well as everyday lifenotably, education and law enforcement. What's more, over the past two decades, devolution has given them expanded responsibilities in core areas like health care and welfare. The ability of state governments to meet their obligations is now threatened by yawning budget deficits.

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