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G.A.O. Report Chronicles Huge Growth in Government

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Despite raising taxes over the past 30 years to a record level, state and local governments have been unable to keep pace with the demand for services, triggering record deficits as well, according to a fact sheet published by the U.S. General Accounting Office.

The report on state and local finances between 1961 and 1990 shows a vastly expanded government sector, but one that has also struggled to make ends meet.

The survey, "Changing Patterns in State-Local Finances,'' contains a wealth of information, mostly presented in the form of graphs and charts, on state and local governments' revenues, spending, and federal aid.

The past three decades have brought new fiscal challenges for education, the report makes clear. Periodic freezes in federal aid and in property-tax revenue and changing demands on governments have caused education's funding share to slip, while health-care programs have logged consistent gains.

Education remains the largest line-item in state and local budgets, accounting for 35 percent of all spending, according to the G.A.O. Elementary and secondary schools alone consume 24.2 percent of the total.

The report found that education spending stopped growing in real terms between 1976 and 1983, with higher-education increases making up for cuts in elementary and secondary spending. Since that time, however, there has been a rebound for school funding, with increases going mostly to K-12 education.

Examining the larger budget picture, the report reveals a shift in the mix of state and local taxes.

Policymakers in 1961 relied most heavily on property taxes, followed by sales taxes, miscellaneous fees and charges, and income taxes. Thirty years later, sales taxes topped the list, and income taxes had assumed a more important role.

The report cites a dip in local property-tax collections beginning in 1972, when voter rebellions led to rollbacks. The declines continued through 1982.

By 1984, state and local governments had witnessed the end of budgetary balances or surpluses. At that point began the trend toward deficits, which continued to swell up through 1990.

In the Black or Red?

Technically, local governments and states--which with only one exception are required by law to balance their budgets--have continued to run a surplus since 1984.

The report points out, however, that that is only because of revenues from employee-retirement and other social-insurance funds.

Excluding social-insurance money, which must be saved in order to be paid out as pensions and other benefits in the future, state and local governments have been running in the red.

The G.A.O. prepared the report at the request of U.S. Representative Richard A. Gephardt, Democrat of Missouri, the House majority leader.

Single copies of the report (G.A.O./H.R.D.-92-87FS) are available without charge from the U.S. General Accounting Office, P.O. Box 6015, Gaithersburg, Md. 20877; (202) 275-6241.

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