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					 Addressing State and
Local Fiscal Challenges
 Through the American
     Recovery and
   Reinvestment Act




         July 2009
State and Local Governments in the
        U.S. Federal System
• 89,527 state and local governments
• State and local employment represented approximately
  14 percent of total U.S. employment in 2007
• State and local government operating and capital
  expenditures totaled more than $2 trillion in 2007
• State and local expenditures represented approximately
  12 percent of GDP in 2007
• States and localities received more than $430 billion in
  federal grant funds in 2007 and about $500 billion in
  2009
• State and local governments collected $1.3 trillion in tax
  receipts in 2007

                                                               2
 State and Local Governments Face
    Increasing Fiscal Challenges
Percent of GDP
2
                                                               Operating Surplus/Deficit Fall 2008

0



-2



-4                         Operating Surplus/Deficit Jan 2009


-6
 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055
Source: Historical data from National Income and Product Accounts. Historical data from 1980 – 2007, Sept. 2008 & January, 2009 GAO
        projections from 2008 – 2050 using many CBO projections and assumptions, particularly for next 10 years.

                                                                                                                                      3
      The American Recovery and
Reinvestment Act of 2009 (Recovery Act)

• Has several provisions that may mitigate the fiscal
  difficulties that state and local governments are facing

• Provides about $787 billion in spending and tax
  provisions:

   • More than $580 billion in additional spending

   • More than $280 billion in grants to states (including grants that
     go through states to individuals)




                                                                         4
     Purposes of the Recovery Act

1. To preserve and create jobs and promote economic
   recovery.
2. To assist those most impacted by the recession.
3. To provide investments needed to increase economic
   efficiency by spurring technological advances in science
   and health.
4. To invest in transportation, environmental protection,
   and other infrastructure that will provide long-term
   economic benefits.
5. To stabilize state and local government budgets, in
   order to minimize and avoid reductions in essential
   services.

                                                              5
           GAO’s State and Local
            Reporting Strategy
• Recovery Act requires GAO to “conduct
  bimonthly reviews and prepare reports on such
  reviews on the use by selected States and
  localities of funds made available in this Act.”

• Strategy
  • Longitudinal study of 16 states and the District of Columbia
  • Selection criteria based on the stated purposes of the Recovery
    Act
  • Additional states added as other events dictate, including
    ongoing GAO work
  • Localities sampled within selected states
  • GAO senior executives to coordinate with each selected state

                                                                      6
American Recovery & Reinvestment
              Act
                          1. Arizona
                          2. California
                          3. Colorado
                          4. Florida
                          5. Georgia
                          6. Illinois
                          7. Iowa
                          8. Massachusetts
                          9. Michigan
                          10. Mississippi
                          11. New Jersey
                          12. New York
                          13. North Carolina
                          14. Ohio
                          15. Pennsylvania
                          16. Texas
                          17. Washington, D.C.




                                            7
           Reporting Objectives


1. States’ and localities’ use of funds

2. States’ and localities’ up-front safeguards and
   ongoing monitoring, audits, and evaluations

3. States’ and localities’ plans to evaluate the
   impact of funds



                                                     8
  Projected versus Actual Federal Outlays
     to States and Localities under the
                Recovery Act
                Dollars (in billiions)
                120

                100            Actual
                              federal
                              outlays
                  80           as of
                             June 19,
                               2009
                  60           $28.8

                  40

                  20

                    0
                           2009         2010      2011        2012        2013        2014      2015   2016
                         Fiscal year
Source: GAO analysis of data from CBO, Recovery.gov and Federal Funds Information for States.
                                                                                                              9
    87 Percent of Estimated Fiscal Year 2009 Federal
   Recovery Act Outlays to States and Localities Are in
          the Nine Programs Reviewed by GAO




Source: GAO analysis of data from CBO and Federal Funds Information for States.
                                                                                  10
                     GAO Recommendations

 • Accountability and Transparency
        • Leverage Single Audit as an effective oversight tool
                  Move to earlier reporting on internal controls
                  Focus on Recovery Act programs
                  Give relief for low-risk programs
                  Fund more timely, effective Single Audits

 • Reporting on Impact
        • Provide examples of reporting on jobs created and retained
        • Clarify new or existing program performance measures
 • Communications and Guidance
        • Clarify data quality and reconciliation requirements
        • Specify data certification and approval requirements
        • Ensure more direct communication on funds flowing to each state
Source: GAO.
                                                                            11
    GAO Recovery Act Information

• July 2009 Bi-Monthly Report: GAO-09-829

 Recovery Act: As Initial Implementation Unfolds in
 States and Localities, Continued Attention to
 Accountability Issues Is Essential

• GAO Recovery Act website:      http://www.gao.gov/recovery




                                                               12

				
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