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Why the Fiscal Health of States and Cities Matters

by Jonathan Masters
October 4, 2012

The abandoned Michigan Central Station is seen in Detroit (Eric Thayer/Reuters). The abandoned Michigan Central Station is seen in Detroit (Eric Thayer/Reuters).

In the wake of the recent economic crisis, many state and local governments confront significant fiscal stress that could have national ramifications. The flow of federal stimulus funding is drying up before tax revenues fully recover and forcing many statehouse and city halls to consider tax hikes and/or spending cuts that could slow recovery and, in some cases, undermine long-term growth and global competitiveness. In particular, funding for infrastructure and education—of which states and cities are by far the primary sources—are under the budget knife.

This Backgrounder examines the fiscal woes at the sub-national level and some of the troublesome budget cuts being made. In addition, it explores some innovative initiatives states and cities are taking to do more with less.

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