1、CRS INSIGHT Prepared for Members and Committees of Congress INSIGHTINSIGHTi i State and Local Fiscal Conditions and Economic Shocks Updated June 10, 2020 Policymakers attention to the current economic recession has included its potential effect on state and local governments. This Insight summarizes
2、 the underlying forces affecting state and local finances following a negative economic shock, examines tools available to them in response to such forces, and briefly discusses federal assistance offered in recent recessions. State and Local Finances and Economic Shocks State and local governments
3、are an integral part of U.S. economic activity, with $3.7 trillion in 2017 spending (19% of GDP). Federal, state, and local government revenues tend to increase when the economy is growing (as taxes are paid on increased economic output) and decrease when the economy is not growing. Unlike at the fe
4、deral level, state and local governments must routinely balance their operating budgets, typically every one or two years. All else equal, state and local governments therefore must offset reductions in revenues caused by negative economic shocks with increases in revenues, reductions in spending, o
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