The U.S. Government Accountability Office (GAO) released their annual State and Local Governments' Fiscal Outlook and long-term projections paint a bleak picture. Even though both state and local government near-term fiscal outlooks have improved slightly since 2010, these sectors face long-term revenue declines that will necessitate "substantial policy changes" to stimulate revenue growth.

State economies appear to be re-energizing after several years of slow recovery from recession, according to the Spring 2013 Fiscal Survey of States by the National Association of State Budget Officers (NASBO) and the National Governors Association (NGA). As a result, state government revenues also are improving with 42 governors recommending higher spending levels in FY14. Total FY13 spending, however, remains below the pre-recession 2008 peak, and much of the increased spending will be dedicated to areas where spending was reduced over the past five years.