Pension Crisis

Pension and Health Costs Soar for Pennsylvania Government

Residents may want to brace themselves for big tax hikes

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HARRISBURG, Pa. — People will be paying more and getting less from their governments as health costs and pension obligations will force state and local governments to adjust their budgets over the next 50 years, according to a new report.

The new report from the Government Accountability Office, a nonpartisan congressional agency that audits federal programs, paints a dreary picture of the future of municipal finances in the United States.

The report released Thursday measures the so-called "fiscal gap," which the GAO says is a measure of the action necessary to achieve fiscal balance over the next 50 years.  With expenditures set to rise as a percentage of GDP over the next few decades, and revenues projected to remain mostly flat, the gap will grow year-over-year unless significant action is taken.

Closing the fiscal gap solely with spending cuts or tax increases would require either a 14.2 percent reduction in state and local government expenditures or an equal increase in taxes, the GAO found.