Summary

In response to a congressional request, GAO provided information on state and federal government debt trends to describe the major legal fiscal constraints that states use to control debt.

GAO found that: (1) from fiscal year (FY) 1961 to FY 1985, state aggregate debt grew from $19 billion to $212 billion, while the federal debt grew from $286 billion to $1.8 trillion; (2) from 1981 to 1985, the federal debt grew at an average annual rate of 15 percent, while state debt averaged 12 percent; (3) although the federal debt declined from 56 to 33 percent of the gross national product (GNP) from 1961 through 1980, it increased to 46 percent from 1981 to 1985; (4) at the same time, state debt remained stable at about 4 to 5 percent of GNP; (5) since states incur debts for capital projects, while the federal government incurs debt for both capital projects and operating expenses, federal responsibilities may require the federal government to incur intentional budget deficits; (6) state nonguaranteed debt accounted for 71 percent of state long-term debt, while full-faith debts accounted for only 29 percent of long-term debt; (7) 25 states have statutory provisions that limit the outstanding full-faith debt in dollar values, and 34 have constitutional balanced budget requirements; and (8) states use debt control procedures that the federal government could not use without affecting the balance of power between Congress and the President.