It is clear that the business cycle has a pronounced effect on the financial health of some state and local governments, as well as on the level of savings in the entire state and local government sector. Indeed, it was the severity of the 1975 recession that pushed New York City over the edge and brought many other local governments and at least one state dangerously close to fiscal insolvency. The more recent recession did not produce disasters of this same magnitude, though the fiscal position of some state and local governments deteriorated. In both recoveries, the substantial surpluses accumulated by the state and local government sector as a whole have attracted much attention.

This report is part of the collection of scanned historical documents available to the public.