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GAO Report Shows Day Of Fiscal Reckoning Is Near; States Must Take Swift Action

ALEXANDRIA, Va., May 2, 2013 /PRNewswire-USNewswire/ -- Bob Williams, President of State Budget Solutions (SBS), a national nonprofit organization advocating for fundamental reform of state budgets and pensions, released the following statement regarding the recent report by the Government Accountability Office (GAO) "State and Local Governments Fiscal Outlook." The GAO found that closing the fiscal gap in the state and local government sector would require action to be taken today and maintained for each year equivalent to a 14.2 percent reduction in the state and local government sector's current expenditures or an equivalent 14.2 percent increase in taxes.

"We have long said that lawmakers' approaches to drafting state budgets only put states closer to the financial cliff, and the recent GAO report illustrates just how close states are to going over the edge. The Day of Reckoning is swiftly approaching," said Williams.

Williams explained, "The GAO report explains that the financial problems can be attributed to two main factors: by the rising health-related costs of state and local expenditures on Medicaid and the cost of pensions and health care compensation for state and local government employees and retirees. Before agreeing to expand Medicaid, state lawmakers must first carefully consider the exorbitant costs that could accompany such a decision. Federal dollars will eventually dry up. Lawmakers must also reform pensions and consider defined contribution plans that will protect citizens and retirees."

"One solution that can address and fix state budget shortfalls is the budgeting approach known as performance based budgeting. Performance based budgeting focuses on what taxpayers are getting for the money being spent on services right now. It ensures that state government is serving its citizens as efficiently and effectively as possible, and that the state spends only the money that it has and does not kick the can down the road to future generations," Williams said.

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