The New York City and Cleveland fiscal crises of the 1970's, the decay of public infra-structures, growing public employee pension debt, and the increased incidence of shortfalls in the cash budgets of state and local governments suggest that not all state and local governments stand on a firm fiscal base. Recent and continued cutbacks in federal domestic spending and in aid to state and local governments means added financial and political pressure on the state and local sectors. Needs and demands remain constant and interest groups who once went to Washington for public dollars and favorable regulation now focus on the state and local sectors. These factors have significant long-run effects on the fiscal viability of state and local governments. With declining current resources and rising spending pressures, officials in these governments may turn to the one place where dollars are available - - the asset accounts. By failing to maintain the state's infra-structure, by underfunding pensions, or by simply borrowing to pay for current services, politicians and bureaucrats can gather additional resources to meet service demands. The problem obtains, however, that while current services are provided, public assets are depleted. The persons who tend to lose in this process are future taxpayers who inherit a lower public asset base than they should. In this investigation, the researchers are assessing the asset and liability base of state governments and how it has changed in the past fifteen years. The data period for this project is 1971 to 1984 for the forty-eight mainland states. The data for this research include new estimates of governmentally held public wealth, defined as the difference between the value of a government's assets and of its liabilities. The stock of a government's assets are its infra-structure, (roads, buildings, and computers), and its financial assets, (cash, stocks and bonds). Liabilities are short and long-term debt and unfunded public pension funds. Change in the level of this public wealth over a fiscal year constitutes government savings or dissavings, depending upon whether wealth increases or decreases. The researchers assess the budgetary decisions of state officials to expand current services and transfers, to reduce current tax levels, and finally to expand or deplete state public assets. Implicit in this assessment is an analysis of why the time preferences exhibited in the public and private sectors may differ.
