Disaster Recovery: Recent Disasters Highlight Progress and Challenges

Recent hurricanes, wildfires, and flooding have highlighted the challenges the federal government faces in responding effectively to natural disasters. The 2017 and 2018 hurricanes and wildfires affected millions of individuals and caused billions of dollars in damages. In March 2019, the Midwest experienced historic flooding that affected millions of acres of agriculture and damaged infrastructure. Since 2005, federal funding for disaster assistance is at least $450 billion. Increasing reliance on federal help to address natural disasters is a key source of federal fiscal exposure, particularly as certain extreme weather events become more frequent and intense.

This statement discusses, among other things, FEMA's and other federal agencies' progress and challenges related to disaster resilience, recovery programs, and workforce management. This statement is based on GAO reports issued from September 2012 through October 2019, and also includes preliminary observations from ongoing GAO reviews. GAO examined federal laws and documents; interviewed agency officials; and visited disaster damaged areas in California, Florida, South Carolina, North Carolina, Puerto Rico, Texas, and the U.S. Virgin Islands, where GAO also interviewed federal and local officials.

GAO's issued and ongoing work has identified progress and challenges in the Federal Emergency Management Agency's (FEMA) and other federal agencies' disaster recovery efforts, as discussed below.

Disaster resilience. GAO found that federal and local efforts to improve resilience can reduce the effects and costs of future disasters. FEMA has made progress in this area, but in November 2017, GAO found that more consistent planning could help ensure that rebuilding efforts incorporate hazard mitigation, which would increase the resilience of infrastructure during future disasters. GAO recommended that FEMA take steps to consistently integrate hazard mitigation into its recovery process. FEMA is working to address these recommendations.

Managing long-term recovery. GAO's work has shown that federal recovery programs are complicated and can be slow to provide assistance. For example, in October 2019, GAO reported that local officials described onerous documentation requirements in FEMA's Public Assistance program and the unique challenge of removing debris following the 2017 wildfires. GAO recommended that FEMA assess its operations to identify actions to enhance future recovery from severe wildfires. In March 2019, GAO reported that the ad hoc nature of disaster recovery block grants from the Department of Housing and Urban Development delayed the availability of funding. GAO recommended, among other things, that Congress consider permanently authorizing this grant program to meet the needs of disaster survivors in a timely manner.

FEMA workforce management. GAO has previously reported on long-standing workforce management challenges, such as ensuring an adequately-staffed and trained workforce to provide effective assistance. For example, GAO reported in September 2018 that the 2017 disasters overwhelmed FEMA's workforce and a lack of trained staff with program expertise led to complications in its response efforts, particularly after Hurricane Maria. While FEMA has taken actions to address several of GAO's workforce management-related recommendations since 2016, a number of recommendations have not yet been implemented. GAO is currently reviewing FEMA's workforce management efforts and lessons learned from the 2017 disasters and will report its findings early next year.

GAO has made numerous recommendations in prior reports designed to address the challenges discussed in this statement. Federal agencies have taken steps to address these recommendations and GAO is monitoring agencies' ongoing efforts.

Thank you for the opportunity to discuss our work on the Federal  Emergency Management Agency’s (FEMA) and other federal agencies’  efforts related to disaster recovery.

Recent hurricanes, wildfires, and other events have highlighted the  challenges the federal government faces in responding effectively to  natural disasters—both in terms of immediate response and long-term  recovery efforts. According to FEMA’s 2017 after action report, the 2017  hurricanes and wildfires collectively affected 47 million people, and  hurricanes Harvey, Irma, and Maria all rank among the top five costliest  hurricanes on record. The 2018 hurricane season followed with  hurricanes Florence and Michael, causing nearly $50 billion of damage,  according to the National Oceanic and Atmospheric Administration.  Furthermore, the deadly and destructive wildfires continued into 2018,  including the Camp Fire in northern California, which destroyed more than  18,500 buildings and was the costliest and deadliest wildfire in the state’s  history. In March 2019, the Midwest experienced historic flooding that  affected millions of acres of agriculture, numerous cities and towns, and  caused widespread damage to public infrastructure. Collectively, these  extreme weather events have stretched and strained federal response  and recovery efforts and staff.

The rising number of natural disasters and increasing state, local, and  tribal reliance on federal disaster assistance is a key source of federal  fiscal exposure—which can come from federal responsibilities, programs,  and activities, such as national flood insurance, that may legally commit  or create the expectation for future spending. Since 2005, federal  funding for disaster assistance is at least $450 billion, most recently for  catastrophic hurricanes, flooding, wildfires, and other losses in 2017 and  2018. Disaster costs are projected to increase as extreme weather  events become more frequent and intense due to climate change—as  observed and projected by the U.S. Global Change Research Program  and the National Academies of Sciences, Engineering, and Medicine.

One way to save lives, reduce future risk to people and property, and  minimize federal fiscal exposure from natural disasters is to enhance  resilience. For example, in September 2018, we reported that elevated  homes and strengthened building codes in Texas and Florida prevented  greater damages during the 2017 hurricane season. Further, in October  2018, the Disaster Recovery Reform Act of 2018 (DRRA) was enacted,  which focuses on improving preparedness, mitigation, response and  recovery. Specifically, the DRRA contains provisions that address many  areas of emergency management, including wildfire mitigation, public  assistance, and individual assistance, among others. Given the  importance of planning for the risks and costs of future disasters, GAO is  developing a disaster resilience framework to support analysis of federal  opportunities to facilitate and promote resilience to natural disasters, and  will publish this framework by the end of the year.

My statement today discusses our prior and ongoing work on federal  recovery efforts and continued challenges across three key areas: (1)  disaster resilience and mitigation, (2) managing complex, long-term  recovery assistance programs, and (3) FEMA workforce management  challenges. My statement today is based on products we issued from  September 2012 through October 2019, along with preliminary  observations from our ongoing reviews on federal recovery related issues  for a number of congressional committees and subcommittees.

To perform our prior work, we reviewed federal laws related to emergency  management, analyzed documentation from FEMA and the Department  of Housing and Urban Development (HUD), and interviewed relevant  agency officials. More detailed information on the scope and methodology  for our prior work can be found in each of the issued reports listed in  appendix I. For our ongoing work, we reviewed federal laws such as the  DRRA, and analyzed FEMA documents, including policies, procedures,  and guidance specific to emergency management. See the list of our  ongoing reviews in appendix II. We have conducted site visits to areas  throughout the nation that were affected by disasters in 2017, 2018, and  2019, including California, Florida, North Carolina, South Carolina, Puerto  Rico, Texas, and the U.S. Virgin Islands (USVI). During these visits, we  met with federal, state, territorial, and local government and emergency  management officials to discuss disaster response and recovery efforts  for hurricanes Harvey, Irma, and Maria in 2017, and the California  wildfires and hurricanes Florence and Michael in 2018. In addition, we  regularly followed up with relevant officials to solicit updated information  on agency actions taken in response to our recommendations.

We conducted the work on which this statement is based in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on  our audit objectives.

FEMA Has Taken Steps to Strengthen Disaster Resilience, but Additional Actions are Needed to Fully Address Remaining Challenges

We have previously reported on the extent to which FEMA programs  encourage disaster resilience during recovery efforts and our prior and  ongoing work also highlight opportunities to improve disaster resilience  nationwide. Specifically, we reported on (1) federal efforts to strengthen  disaster resilience, (2) FEMA’s efforts to promote hazard mitigation  through the Public Assistance program, and (3) crafting appropriate  federal responses to the effects of climate change.

First, in July 2015, we found that states and localities experienced  challenges when trying to use federal funds to maximize resilient  rebuilding in the wake of a disaster. In particular, they had difficulty  navigating multiple federal grant programs and applying federal resources  toward their most salient risks because of the fragmented and reactive  nature of the funding. In our 2015 report, we recommended that the  Mitigation Framework Leadership Group—an interagency body chaired  by FEMA—create a National Mitigation Investment Strategy to help  federal, state, and local officials plan for and prioritize disaster resilience  efforts. In August 2019, FEMA took action to fully implement our  recommendation by publishing this strategy.

Second, in November 2017, we found that FEMA had taken some actions  to better promote hazard mitigation as part of its Public Assistance grant  program, which provides grant funding for cost-effective hazard mitigation  measures to reduce or eliminate the long-term risk to people and property  from future disasters and their effects. However, we also reported that  more consistent planning for, and more specific performance measures  related to, hazard mitigation could help ensure that mitigation is  incorporated into recovery efforts. We recommended, among other  things, that FEMA (1) standardize planning efforts for hazard mitigation  after a disaster and (2) develop performance measures for the Public  Assistance grant program to better align with FEMA’s strategic goal for  hazard mitigation in the recovery process. The Department of Homeland  Security (DHS) concurred with our recommendations, and officials  reported taking steps to increase coordination across its Public  Assistance, mitigation, and field operations to ensure hazard mitigation  efforts are standardized and integrated into the recovery process.  Additionally, FEMA officials reported taking actions to begin developing  disaster-specific mitigation performance measures. However, FEMA has  yet to finalize these actions, such as by proposing performance measures  to FEMA senior leadership. As such, we are continuing to monitor  FEMA’s efforts to address these recommendations.

Third, in September 2017, we reported that the methods used to estimate  the potential economic effects of climate change in the United States— using linked climate science and economics models—could inform  decision makers about significant potential damages in different U.S.  sectors or regions, despite the limitations. For example, for 2020  through 2039, one study estimated between $4 billion and $6 billion in  annual coastal property damages from sea level rise and more frequent  and intense storms. We found that the federal government has not  undertaken strategic government-wide planning on the potential  economic effects of climate change to identify significant risks and craft  appropriate federal responses. As a result, we recommended the  Executive Office of the President, among others, should use information  on the potential economic effects of climate change to help identify  significant climate risks facing the federal government and craft  appropriate federal responses, such as establishing a strategy to identify,  prioritize, and guide federal investments to enhance resilience against  future disasters. However, as of June 2019, officials had not yet taken  action to address this recommendation.

Federal Programs Provide Long-Term Disaster Recovery Assistance, but Challenges in Managing Complex Recovery Programs Exist

FEMA and other federal agencies provide multiple forms of disaster  recovery assistance after a major disaster has been declared, including  through FEMA’s Public Assistance and Individual Assistance programs,  HUD’s Community Development Block Grant Disaster Recovery (CDBG- DR) program, and other efforts. Through these programs, the federal  government obligates billions of dollars to state, tribal, territorial, and local  governments, certain nonprofit organizations, and individuals that have  suffered injury or damages from major disaster or emergency incidents,  such as hurricanes, tornados, or wildfires. In September 2016, we  reported that, from fiscal years 2005 through 2014, FEMA obligated  almost $46 billion for the Public Assistance program and over $25 billion  for the Individual Assistance program. According to FEMA’s September  2019 Disaster Relief Fund report, total projected obligations through fiscal   year 2019 for the Public Assistance and Individual Assistance programs  since August 1, 2017, are approximately $19 billion and $9 billion,  respectively. Further, in March 2019, we reported that in response to the  2017 disasters, HUD had awarded approximately $32.9 billion in CDBG- DR funds to four grantees as of February 2019—$19.9 billion to Puerto  Rico, $9.8 billion to Texas, $1.9 billion to the USVI, and $1.3 billion to  Florida. As of September 2019, much of these awarded funds had been  allocated to the grantees via Federal Register notices with the exception  of Puerto Rico. HUD had not allocated the remaining $10.2 billion it  awarded to Puerto Rico as of September 10, 2019, due to recent  concerns about the territory’s governance and financial management  challenges. Given the high cost of these programs, it is imperative that  FEMA and HUD continue to make progress on the challenges we have  identified in our prior and ongoing work regarding recovery efforts.

FEMA’s Public Assistance program provides grants to state, tribal,  territorial, and local governments, as well as certain types of private  nonprofit organizations, for debris removal; emergency protective  measures; and the repair, replacement, or restoration of disaster- damaged, publicly owned facilities. It is a complex and multistep  program administered through a partnership among FEMA, state, and  local officials. Prior to implementing the Public Assistance program,  FEMA determines a state, territorial or tribal government’s eligibility for  the program using primarily the per capita damage indicator. In our  September 2018 report on federal response and recovery efforts for the  2017 hurricanes and wildfires, we reported on FEMA’s implementation of  the Public Assistance program, which has recently undergone significant  changes as a result of federal legislation and agency initiatives.  Specifically, we reported on FEMA’s use of its redesigned delivery model  for providing grants under the Public Assistance program, as well as the  alternative procedures for administering or receiving such grant funds that  FEMA allows states, territories, and local governments to use for their  recovery. Our prior and ongoing work highlight both progress and  challenges with FEMA’s Public Assistance program, including the  agency’s methodology for determining program eligibility, the redesigned  delivery model, and the program’s alternative procedures.

Criteria for Determining Public Assistance Eligibility

In September 2012, we found that FEMA primarily relied on a single  criterion, the per capita damage indicator, to determine a jurisdiction’s  eligibility for Public Assistance funding. However, because FEMA’s per  capita indicator, set at $1 in 1986, does not reflect the rise in (1) per  capita personal income since it was created in 1986 or (2) inflation from  1986 to 1999, the indicator is artificially low. Our analysis of actual and  projected obligations for 508 disaster declarations in which Public  Assistance was awarded during fiscal years 2004 through 2011 showed  that fewer disasters would have met either the personal income-adjusted  or the inflation-adjusted Public Assistance per capita indicators for the  years in which the disaster was declared. Thus, had the indicator been  adjusted annually since 1986 for personal income or inflation, fewer  jurisdictions would have met the eligibility criteria that FEMA primarily  used to determine whether federal assistance should be provided, which  would have likely resulted in fewer federal disaster declarations and lower  federal costs.

We recommended, among other things, that FEMA develop and  implement a methodology that more comprehensively assesses a  jurisdiction’s capacity to respond to and recover from a disaster without  federal assistance, including fiscal capacity and consideration of  response and recovery capabilities. DHS concurred with our  recommendation and, in January 2016, FEMA was considering  establishing a disaster deductible, which would have required a  predetermined level of financial or other commitment before FEMA would  have provided assistance under the Public Assistance program. In  September 2019, FEMA told us that it was considering options for  alternative methodologies for, among other things, assessing a  jurisdiction’s independent capacity to respond to and recover from  disasters. In addition, the DRRA includes a provision directing the FEMA  Administrator to initiate rulemaking to update the factors considered when  evaluating requests for major disaster declarations. According to FEMA  documentation, as of September 2019, the agency was working to  implement this provision through rulemaking proposals, including  increasing the per capita indicator to account for inflation. Until FEMA  implements a new methodology, the agency will not have an accurate  assessment of a jurisdiction’s capabilities and runs the risk of  recommending that the President award Public Assistance to jurisdictions  that have the capacity to respond and recover on their own.

Redesigned Public Assistance Delivery Model

In November 2017, we reported that FEMA redesigned its delivery model  for providing grants under the Public Assistance program. As part of the  redesign effort, FEMA developed a new, web-based case management  system to address past challenges, such as difficulties in sharing grant  documentation among FEMA, state, and local officials and tracking the  status of Public Assistance projects. Both FEMA and state officials  involved in testing the redesigned delivery model stated that the new case  management system’s capabilities could lead to greater transparency and  efficiencies in the program. However, we found that FEMA had not fully  addressed two key information technology management controls that are  necessary to ensure systems work effectively and meet user needs. We  recommended, among other things, that FEMA (1) establish controls for  tracking the development of system requirements, and (2) establish  system testing criteria, roles and responsibilities, and the sequence and  schedule for integration of other relevant systems. DHS concurred with  these recommendations and, as of October 2019, has fully implemented  both. FEMA’s original intention was to implement the redesigned delivery  model for all future disasters beginning in January 2018. However, in  September 2017, FEMA expedited full implementation of the redesigned  model shortly after Hurricane Harvey made landfall. In September 2018,  we reported that local officials continued to experience challenges with  using the new Public Assistance web-based, case management system  following the 2017 disasters, such as not having sufficient guidance on  how to use the new system and delays with FEMA’s processing of their  projects.

Public Assistance Alternative Procedures in Puerto Rico and the U.S Virgin Islands

Our prior and ongoing work highlight the challenges with implementing  the Public Assistance program, including the alternative procedures, in  Puerto Rico and the USVI. In particular, our work has identified  challenges related to (1) developing fixed-cost estimates and (2)  implementing flexibilities provided by the Bipartisan Budget Act of 2018.  This Act allows FEMA, Puerto Rico, and the USVI to repair and rebuild  critical services infrastructure—such as medical and education facilities— so it meets industry standards without regard to pre-disaster condition  (see fig. 1).

Unlike in the standard Public Assistance program where FEMA will fund  the actual cost of a project, the Public Assistance alternative procedures  allow awards for permanent work projects to be made on the basis of  fixed-cost estimates to provide financial incentives for the timely and cost- effective completion of work. FEMA officials in Puerto Rico and the USVI  stated that the development of a “cost factor” for use in the fixed-cost  estimating process had slowed the pace of FEMA obligations for  permanent work projects. Specifically, these factors are intended to  ensure that the costs associated with implementing projects in Puerto  Rico and the USVI are sufficiently captured when developing the fixed- cost estimates for alternative procedures projects. Since incorporating the  cost factor into the fixed-cost estimating process will increase the amount  of funding obligated for any given permanent work project, FEMA officials  explained that Puerto Rico and the USVI had an incentive to delay the  obligation of individual projects until this factor was finalized. For  example, FEMA officials in the USVI told us in May 2019 that obligations  for permanent work projects in the territory had been mostly on hold since  October 2018 while an independent contractor worked to develop the  USVI-specific cost factor.

FEMA officials told us that USVI officials disagreed with the initial USVI- specific cost factors the independent contractor proposed. USVI officials  contended that the cost factors were insufficient in accurately capturing  the unique circumstances that influence construction costs in the territory,  such as the limited availability of local resources and the need to import  materials and labor. In May 2019, the contractor proposed a new cost  factor, which FEMA approved on an interim basis pending further  analysis. In July 2019, FEMA officials told us that while additional  analyses are required to ensure its final process for developing fixed-cost  estimates in the USVI accurately captures construction costs, using this  interim cost factor in the meantime allows FEMA and USVI officials to  move forward with the development and final approval of alternative  procedures projects. In August 2019, a senior USVI official told us the  territory plans to begin using the interim cost factor, where appropriate, to  keep projects progressing forward. However, this official stated that the  USVI questioned whether the interim cost factor did, in fact, sufficiently  capture the actual costs of construction in the USVI. Given the  uncertainty around these fixed-cost estimates, USVI officials told us the  territory will need to balance the potential flexibilities provided by the  alternative procedures program with the financial risk posed by cost  overruns when deciding whether to use the alternative procedures or the  standard Public Assistance program for any given permanent work  project. Specifically, these officials stated that the USVI plans to pursue  alternative procedures projects that do not include high levels of  complexity or uncertainty to reduce the risk of cost overruns, especially  given its already difficult financial situation.

In addition, according to FEMA guidance, the Puerto Rico-specific cost  factor was developed by a third-party center of excellence comprising  personnel selected by FEMA and Puerto Rico. Through our ongoing  work we learned that FEMA convened a panel of FEMA engineers to  assess the cost factor methodologies proposed by the center of  excellence. In July 2019, FEMA approved the use of a cost factor  designed to account for location-specific construction costs in Puerto Rico  to ensure that fixed-cost estimates for alternative procedures projects are  accurate. This cost factor consists of cost indices to apply to urban, rural,  and insular (the islands of Vieques and Culebra) areas of Puerto Rico.  According to FEMA officials, these cost indices will compile location- specific construction costs for each of these three areas. We are currently  assessing FEMA’s process for developing cost estimates for projects  under both the standard and alternative procedures programs, and plan  to report our results in early 2020.

As of September 2019, FEMA officials told us the agency had obligated  funding for 14 alternative procedures projects in Puerto Rico out of  approximately 9,000 projects FEMA and Puerto Rico are working to  develop for inclusion in the program. According to FEMA guidance,  Puerto Rico must use the alternative procedures for all large permanent  work projects and its deadline for finalizing the fixed-cost estimates for  these projects was October 11, 2019. However, on October 8, 2019,  Puerto Rico requested that FEMA extend this deadline. In response,  FEMA acknowledged that Puerto Rico and FEMA have significant work  remaining to develop and finalize the fixed-cost estimates for alternative  procedures projects. As a result, FEMA authorized all parties to continue  developing these projects while FEMA works to establish a new deadline  for finalizing fixed-cost estimates in Puerto Rico.

Unlike Puerto Rico, the USVI has the flexibility to pursue either the  alternative procedures or the standard procedures on a project-by-project  basis. As of September 2019, FEMA had obligated funding for two  alternative procedures projects in the USVI. As the USVI’s deadline for  finalizing these projects is in March 2020, it is too early to gauge the  extent to which the alternative procedures will play a role in the USVI’s  long-term recovery strategy.

In addition, our preliminary observations indicate that FEMA, Puerto Rico,  and USVI officials have reported challenges with the implementation of  the flexibilities authorized by section 20601 of the Bipartisan Budget Act.  This section of the Act allows for the provision of assistance under the  Public Assistance alternative procedures to restore disaster-damaged  facilities or systems that provide critical services to an industry standard  without regard to pre-disaster condition. Officials from Puerto Rico’s  central government stated that they disagreed with FEMA’s interpretation  of the types of damages covered by section 20601 of the Bipartisan  Budget Act of 2018. In response, FEMA officials in Puerto Rico stated  they held several briefings with Puerto Rico’s central recovery office to  explain FEMA’s interpretation of the section. Further, FEMA officials in  the USVI told us that initially, they had difficulty obtaining clarification from  FEMA headquarters regarding how to implement key components of  section 20601 of the Act. In June 2019, the Additional Supplemental  Appropriations for Disaster Relief Act of 2019 was signed into law and  provides additional direction to FEMA regarding the implementation of  section 20601. Among other things, this legislation includes a provision  directing FEMA to change its process for determining whether a disaster- damaged facility is eligible for repair or replacement. FEMA evaluated  this and other provisions of the Act and, in September 2019, issued an  updated policy to provide clear guidance moving forward, according to  agency officials. We will continue to evaluate these identified challenges  and any efforts to address them, as well as other aspects of recovery  efforts in the USVI and Puerto Rico, and plan to report our findings in  November 2019 and January 2020, respectively.

The Individual Assistance program provides financial and direct  assistance to disaster victims for expenses and needs that cannot be met  through other means, such as insurance. In May 2019, we reported on  FEMA’s efforts to provide disaster assistance under the Individual  Assistance program to older adults and people with disabilities following  the 2017 hurricanes. We found that aspects of the application process  for FEMA assistance were challenging for older individuals and those with  disabilities. Further, according to stakeholders and FEMA officials,  disability-related questions in the Individual Assistance registration  materials were confusing and easily misinterpreted. While FEMA had  made some efforts to help registrants interpret the questions, we  recommended, among other things, that FEMA (1) implement new  registration-intake questions that improve FEMA’s ability to identify and  address survivors’ disability-related needs, and (2) improve  communication of registrants’ disability-related information across FEMA  programs. DHS concurred with the first recommendation, and officials  reported that in May 2019 the agency updated the questions to directly  ask individuals if they have a disability. The agency has taken actions to  fully implement this recommendation and, according to FEMA’s analysis  of applications for assistance following recent disasters—which used the  updated questions—the percentage of registrants who reported having a  disability increased.

However, DHS did not concur with the second recommendation, noting  that it lacks specific funding to augment its legacy data systems. FEMA  officials stated that they began a long-term data management  improvement initiative in April 2017, which they expect will ease efforts to  share and flag specific disability-related data. While we acknowledge  FEMA’s concerns about changing legacy systems when it has existing  plans to replace those systems, we continue to believe there are other  cost-effective ways that are likely to improve communication of  registrants’ disability-related information prior to implementing the system  upgrades. For example, FEMA could revise its guidance to remind  program officials to review the survivor case file notes to identify whether  there is a record of any disability-related needs.

We also have work underway to assess FEMA’s Individuals and  Households Program, a component program of Individual Assistance.  Through this program, as of April 2019, FEMA had awarded roughly $4.7  billion in assistance to almost 1.8 million individuals and households for  federally-declared disasters occurring in 2017 and 2018. Specifically, we  are analyzing Individuals and Households Program expenditures and  registration data for recent years; reviewing FEMA’s processes, policies,  and procedures for making eligibility and award determinations; and  examining survivors’ reported experiences with this program, including  any challenges, for major disaster declarations occurring in recent years.  We plan to report our findings in early 2020.

FEMA’s Individuals and Households Program  provides individuals with financial assistance,  such as grants to help repair or replace  damaged homes, and temporary direct  housing assistance, such as recreational  vehicles.

HUD CDBG-DR grants provide funding that disaster-affected  communities may use to address unmet needs for housing, infrastructure,  and economic revitalization. In March 2019, we reported on the status of  CDBG-DR grants following the 2017 disasters, plans for monitoring the  program, and challenges HUD and grantees faced in administering these  grants. We found that HUD lacked adequate guidance for staff  reviewing key information, such as the quality of grantees’ financial  processes and procedures and assessments of grantees’ capacity and  unmet needs. Further, we found HUD had not completed monitoring or  workforce plans that identify key risk factors and critical skills and  competencies required for program implementation, among other things.  In addition, we found that Congress has not established permanent  statutory authority for CDBG-DR but rather has used supplemental  appropriation legislation to authorize HUD to establish requirements via  Federal Register notices. Without such permanent statutory authority,  HUD must customize grantee requirements for each disaster. The ad hoc  nature of CDBG-DR has created challenges for CDBG-DR grantees, such  as lags in accessing funding and coordinating these funds with other  disaster recovery programs. For example, it took 154 days (or 5 months)  for HUD to issue the requisite Federal Register notice after the first  appropriation for the 2017 hurricanes. According to HUD officials, they  delayed issuance of the first notice for the 2017 hurricanes because they  expected a second appropriation and wanted to allocate those funds in  the same notice. However, because the second appropriation took longer  than HUD expected, the first notice allocated only the first appropriation.

We recommended that Congress consider permanently authorizing a  disaster assistance program to address unmet needs in a timely manner.  In addition, we made five recommendations to HUD. Specifically, we  made two recommendations to HUD regarding developing additional  guidance for staff to use when reviewing grantees’ planning  documentation. HUD partially agreed with these two recommendations,  stating that some of this guidance was already in place. Because HUD  acknowledged that providing additional guidance would improve its  review process, we revised these two recommendations accordingly to  reflect the need for additional guidance. We also made three additional  recommendations to HUD, including that the agency should develop a  monitoring plan for grants and conduct workforce training. HUD generally  agreed with these recommendations and indicated it planned to develop  monitoring strategies. HUD also stated that it had developed a staffing  plan, but we noted the agency still needed to conduct workforce planning  to determine if the number of staff the agency planned to hire was  sufficient. We are continuing to monitor HUD’s efforts to address these  recommendations.

Additional Challenges in Federal Response and Recovery Efforts

In addition to those described above, we reported on challenges FEMA  faced in (1) providing mass care to disaster survivors, (2) assisting  jurisdictions affected by wildfires, and (3) supporting electricity grid  recovery efforts in Puerto Rico.

In September 2019, we reported on FEMA’s and the American Red  Cross’ efforts to coordinate mass care—which includes sheltering,  feeding, and distributing emergency supplies—following the 2017  hurricanes. We found that some needs related to mass care were  unmet. For example, local officials in Texas said flooded roads prevented  trucks from delivering supplies. Further, mass care providers encountered  challenges in part because state and local agreements with voluntary  organizations that help to provide mass care to disaster survivors did not  always clearly detail what services these organizations were capable of  providing. Among other things, we also found that while state, territorial,  and local grantees of federal disaster preparedness grants are required to  regularly submit information on their capabilities to FEMA, the mass care  information some grantees provided to FEMA was not specific enough to  aid its response in 2017. Moreover, as FEMA does not require grantees  to specify the organizations providing mass care services in their  capabilities assessments, grantees and FEMA may not be collecting  reliable information on capabilities.

As a result of our findings in this report, we made one recommendation to  DHS, four recommendations to FEMA, and one recommendation to the  American Red Cross. Specifically, among other things, we  recommended that FEMA should emphasize the importance of defining  roles and responsibilities in its guidance to grantees in states and  localities and require them to solicit key capabilities information from  mass care providers. DHS concurred with four recommendations, but did  not concur with our recommendation requiring grantees to solicit key  information from organizations providing mass care services and to  specify these organizations in capability assessments. Specifically, DHS  and FEMA stated that requiring grantees to include this information is not  the most effective approach and would increase their burden. We  modified our recommendation to address this concern and continue to  believe that grantees should make an effort to include mass care  providers in assessing capabilities. We will continue to monitor FEMA’s  progress in fully addressing these recommendations.

Further, in October 2019, we reported on the assistance FEMA provided  to jurisdictions in response to major disaster declarations stemming from  wildfires from 2015 through 2018 (see fig. 2). We found that FEMA  helped state and local officials obtain and coordinate federal resources to  provide for the needs of wildfire survivors and provided more than $2.4  billion in federal assistance. However, state and county officials also  described challenges in responding to wildfire disasters. For example,  onerous documentation requirements for FEMA’s Public Assistance grant  program, a shortage of temporary housing for survivors, and the unique  challenge of removing wildfire debris led to over-excavation on some  homeowners’ lots and lengthened the rebuilding process. We also found  that while FEMA had developed an after-action report identifying lessons  learned from the October and December 2017 wildfires, the agency could  still benefit from a more comprehensive assessment of its operations to  determine if any changes are needed to better respond to the threat  posed by increased wildfire activity.

We recommended that FEMA assess operations to identify any additional  updates to its management controls—such as policies, procedures, or  training—that could enhance future response and recovery from large- scale and severe wildfires. DHS agreed with our recommendation and  described a number of ongoing and planned actions it would take to  address it, including supporting states’ efforts to house disaster survivors,  developing guidance for housing grants authorized by the DRRA, and  taking steps to identify areas of innovation in response to wildfire  disasters. DHS anticipates that these efforts will be put into effect by  December 2020 and we will continue to monitor DHS and FEMA’s  progress in addressing this recommendation.

In October 2019, we reported on federal efforts to support electricity grid  recovery in Puerto Rico. We found that FEMA and other federal  agencies can support long-term electricity grid recovery efforts and  incorporate resilience through three primary roles—providing funding and  technical assistance and coordinating among local and federal agencies.  However, we found that zero permanent, long-term grid recovery projects  in Puerto Rico had received funding as of July 2019 as Puerto Rico was  still establishing priorities for permanent work. Further, we found that  certain challenges are hindering progress on electricity grid recovery  efforts in Puerto Rico, including uncertainty about the kinds of projects  that may be eligible for federal funding, local capacity constraints,  uncertainty about available federal funding, and the need for coordination  among local and federal stakeholders.

As a result of our findings, we made three recommendations to FEMA  and one recommendation to HUD. Specifically, we recommended that  FEMA should provide clear written policies, guidance, or regulations to  clarify its plans for implementing new authorities provided by the  Bipartisan Budget Act of 2018 and take steps to enhance coordination  among local and federal entities. DHS concurred with these  recommendations and stated it is working to address them. In addition,  we recommended that HUD establish timeframes and a plan for  publication of the grant process and requirements specifically for CDBG- DR funding for improvements to Puerto Rico’s electricity grid. In its  response to this recommendation, HUD stated that it is closely working  with its federal partners on the requirements for this funding in Puerto  Rico, but did not specifically state whether it would establish the  timeframes and a plan for publication of the grant process and  requirements as we recommended. We continue to believe that this  action is needed since without this information, local entities will continue  to be uncertain regarding what is eligible for CDBG-DR funding. We will  continue to monitor FEMA’s and HUD’s progress in addressing these  recommendations.

Longstanding Workforce Management Challenges Exacerbate Key Issues with Response and Recovery Operations

FEMA’s experiences during the 2017 disasters highlight the importance of  continuing to make progress on addressing the long-standing workforce  management challenges we have previously reported on and continue to  observe in our ongoing work. In particular, our work has identified  challenges related to (1) recruiting, maintaining, and deploying a trained  workforce, (2) the Incident Management Assistance Team program, (3)  Public Assistance program staffing, (4) contracting workforce shortages,  (5) assistance to older adults and people with disabilities, and (6)  workforce capacity and training.

Recruiting, maintaining, and deploying a trained workforce. In  September 2018, we reported that the 2017 disasters—hurricanes  Harvey, Irma, and Maria, as well as the California wildfires—resulted in  unprecedented FEMA workforce management challenges, including  recruiting, maintaining, and deploying a sufficient and adequately-trained  FEMA disaster workforce. FEMA’s available workforce was  overwhelmed by the response needs caused by the sequential and  overlapping timing of the three hurricanes. For example, at the height of  FEMA workforce deployments in October 2017, 54 percent of staff were  serving in a capacity in which they did not hold the title of “Qualified”— according to FEMA’s qualification system standards—a past challenge  we identified. FEMA officials noted that staff shortages and lack of trained  personnel with program expertise led to complications in its response  efforts, particularly after Hurricane Maria.

FEMA’s Incident Management Assistance Team program. In February  2016, we reported on, among other things, FEMA’s efforts to implement,  assess, and improve its Incident Management Assistance Team  program. We found that while FEMA used some leading practices in  managing the program, it lacked a standardized plan to ensure that all  national and regional Incident Management Assistance Team members  received required training. Further, we found that the program had  experienced high attrition since its implementation in fiscal year 2013. We  recommended, among other things, that FEMA develop (1) a plan to  ensure that Incident Management Assistance Teams receive required  training, and (2) a workforce strategy for retaining Incident Management  Assistance Team staff. DHS concurred with the recommendations. FEMA  implemented our first recommendation by developing an Incident  Management Assistance Team Training and Readiness Manual and  providing a training schedule for fiscal year 2017. In response to the  second recommendation, FEMA officials stated in July 2018 that they  plan to develop policies that will provide guidance on a new workforce  structure, incentives for Incident Management Assistance Team  personnel, and pay-for-performance and all other human resource  actions. We are continuing to monitor FEMA’s efforts to address this  recommendation.

Public Assistance program staffing. In November and December 2017,  we reported on staffing challenges in FEMA’s Public Assistance program.  In November 2017, we reported on FEMA’s efforts to address past  workforce management challenges through its redesigned Public  Assistance delivery model. As part of the redesign effort, FEMA created consolidated resource centers to standardize and centralize Public  Assistance staff responsible for managing grant applications, and new  specialized positions to ensure more consistent guidance to applicants.  However, we found that FEMA had not assessed the workforce needed to  fully implement the redesigned model, such as the number of staff  needed to fill certain new positions, or to achieve staffing goals. Further,  in December 2017, we reported on FEMA’s management of its Public  Assistance appeals process, including that FEMA increased staffing  levels for the appeals process from 2015 to 2017. However, we found  that FEMA continued to face a number of workforce challenges, such as  staff vacancies, turnover, and delays in training, which contributed to  processing delays.

Based on our findings from our November and December 2017 reports,  we recommended, among other things, that FEMA (1) complete  workforce staffing assessments that identify the appropriate number of  staff needed to implement the redesigned Public Assistance delivery  model, and (2) document steps for hiring, training, and retaining key  appeals staff, and address staff transitions resulting from deployments to  disasters. DHS concurred with our recommendations to address  workforce management challenges in the Public Assistance program and  have reported taking some actions in response. For example, to address  the first recommendation, FEMA officials have developed preliminary  models and estimates of staffing needs across various programs,  including Public Assistance. However, as of October 2019, the agency  has not yet taken actions to implement this recommendation. To address  the second recommendation, FEMA has collected information on the  amount of time regional appeals analysts spend on appeals, and the  inventory and timeliness of different types of appeals. FEMA officials  stated in September 2018 that they plan to assess this information to  prepare a detailed regional workforce plan. In May 2019, FEMA sent us  additional information and documentation involving its analysis of appeal  inventory and timeliness. As of October 2019, we are evaluating the  information provided by FEMA to determine if they have addressed this  recommendation.

Contracting workforce shortages. In April 2019, we reported on the  federal government’s contracting efforts for preparedness, response, and  recovery efforts related to the 2017 hurricanes and California wildfires.  We found, among other things, that contracting workforce shortages  continue to be a challenge for disaster response and recovery. Further,  although FEMA’s 2017 after-action report recommended increasing  contract support capacities, it did not provide a specific plan to do so. We  also found that while FEMA evaluated its contracting workforce needs in  a 2014 workforce analysis, it did not specifically consider contracting  workforce needs in the regional offices or address Disaster Acquisition  Response Team employees. In our April 2019 report, we  recommended, among other things, that FEMA assess its workforce  needs—including staffing levels, mission needs, and skill gaps—for  contracting staff, to include regional offices and Disaster Acquisition  Response Teams, and develop a plan, including timelines, to address any  gaps. DHS concurred with this recommendation and estimates that it  plans to implement it in the fall of 2019.

Assistance to older adults and people with disabilities. In our May  2019 report on FEMA disaster assistance to older adults and people with  disabilities following the 2017 hurricanes, we found that FEMA began  implementing a new approach to assist individuals with disabilities in June  2018, which shifted the responsibility for directly assisting individuals with  disabilities from Disability Integration Advisors—which are staff FEMA  deploys specifically to identify and recommend actions needed to support  survivors with disabilities—to all FEMA staff. To implement this new  approach, FEMA planned to train all of the agency’s deployable staff and  staff in programmatic offices on disability issues during response and  recovery deployments. According to FEMA, a number of Disability  Integration Advisors would also deploy to advise FEMA leadership in the  field during disaster response and recovery. We found that while FEMA  has taken some initial steps to provide training on the changes, it had not  established a plan for delivering comprehensive disability-related training  to all staff who will be directly interacting with individuals with disabilities.  We recommended, among other things, that FEMA develop a plan for  delivering training to FEMA staff that promotes competency in disability  awareness and includes milestones and performance measures, and  outlines how performance will be monitored. DHS concurred with this  recommendation and reported plans to update FEMA’s position task  books for all deployable staff with information that promotes competency  in disability awareness. In July 2019, officials told us FEMA plans to hire  new staff to focus on integrating the disability competency FEMA-wide  and work with FEMA’s training components to ensure that disability- related training is consistent with the content of the position task books.  We will continue to monitor FEMA’s efforts to address our  recommendation.

FEMA’s workforce capacity and training. In addition to our prior work  on FEMA’s workforce management challenges related to specific  programs and functions, we are continuing to evaluate FEMA’s workforce  capacity and training efforts during the 2017 and 2018 disaster seasons.  Our preliminary observations indicate that there were challenges in  FEMA’s ability to deploy staff with the right kinds of skills and training at  the right time to best meet the needs of various disaster events. For  example, according to FEMA field leadership we interviewed, for some of  the functions FEMA performs in the field, FEMA had too few staff with the  right technical skills to perform their missions—such as inspections of  damaged properties—efficiently and effectively. For other functions, these  managers also reported that they had too many staff in the early stages of  the disaster, which created challenges with assigning duties and  providing on-the-job training. For example, some managers reported that  they were allocated more staff than needed in the initial phases of the  disaster, but many lacked experience and were without someone to  provide direction and mentoring to ensure they used their time efficiently  and gained competence more quickly. In focus group discussions and  interviews with field managers, FEMA officials told us that difficulties  deploying the right mix of staff with the right skills led to challenges such  as delays in making purchases to support FEMA operations, problems  with properly registering applicants for FEMA programs, or poor  communication with nonfederal partners. Nonetheless, FEMA staff have  noted that, despite any suboptimal circumstances during disaster  response, they aimed to and have been able to find a way to deliver the  mission.

As part of this ongoing work, FEMA field leadership and managers also  reported challenges using agency systems to ensure the availability of the  right staff with the right skills in the right place and time. FEMA uses a  system called the Deployment Tracking System to, among other things,  help identify staff available to be deployed and activate and track  deployments. To help gauge the experience level and training needs of its  staff, the agency established the FEMA Qualification System (FQS),  which is a set of processes and criteria to monitor staff experience in  competently performing tasks and completing training that correspond to  their job titles. According to the FQS guidance, staff who have been able  to demonstrate proficient performance of all the relevant tasks and  complete required training receive the designation “qualified,” and are  expected to be ready and able to competently fulfill their responsibilities.  Those who have not, receive the designation “trainee,” and can be  expected to need additional guidance and on-the-job training. FQS  designations feed into the Deployment Tracking System as one key  variable in how the tracking system deploys staff. Among other  challenges with FEMA’s Deployment Tracking System and Qualification  System, FEMA managers and staff in the field told us in focus group  discussions that an employee’s recorded qualification status was not a  reliable indicator of the level at which deployed personnel would be  capable of performing specific duties and responsibilities or their general  proficiency in their positions, making it more difficult for managers to know  the specialized skills or experience of staff and effectively build teams.  We are continuing to assess these and other reported workforce  challenges and plan to report our findings in spring 2020.

Thank you, Chairwoman Titus, Ranking Member Meadows, and Members  of the Subcommittee. This concludes my prepared statement. I would be  happy to respond to any questions you may have at this time.

If you or your staff have any questions concerning this statement, please  contact Christopher P. Currie at (404) 679-1875 or curriec@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this statement. Key contributors  to this statement were Joel Aldape (Assistant Director), Bryan Bourgault  (Analyst-in-Charge), Amanda Miller, and Heidi Nielson. In addition, Aditi  Archer, Anthony Bova, Janice Ceperich, James Cook, Adam Couvillion,  Lorraine Ettaro, Eric Hauswirth, Tracey King, Caryn Kuebler, Amy Moran  Lowe, Amanda Parker, Sara Pelton, Josephine Perez, Amanda Prichard,  Paige Smith, and Johanna Wong made contributions to this statement.

Key contributors to the previous work discussed in this statement are  listed in each of the cited reports.

Appendix I: Related GAO Products Previously Issued

Highway Emergency Relief: Federal Highway Administration Should  Enhance Accountability over Project Decisions. GAO-20-32 (Washington,  D.C.: October 17, 2019).

Wildfire Disasters: FEMA Could Take Additional Actions to Address  Unique Response and Recovery Challenges. GAO-20-5 (Washington,  D.C.: October 9, 2019).

Puerto Rico Electricity Grid Recovery: Better Information and Enhanced  Coordination Is Needed to Address Challenges. GAO-20-141  (Washington, D.C.: October 8, 2019).

Disaster Response: HHS Should Address Deficiencies Highlighted by  Recent Hurricanes in the U.S. Virgin Islands and Puerto Rico.   GAO-19-592 (Washington, D.C.: September 20, 2019).

Disaster Response: FEMA and the American Red Cross Need to Ensure  Key Mass Care Organizations are Included in Coordination and Planning.  GAO-19-526 (Washington, D.C.: September 19, 2019).

Disaster Response: Federal Assistance and Selected States and Territory  Efforts to Identify Deaths from 2017 Hurricanes. GAO-19-486  (Washington, D.C.: September 13, 2019).

Emergency Management: FEMA’s Disaster Recovery Efforts in Puerto  Rico and the U.S. Virgin Islands. GAO-19-662T (Washington, D.C.: July  11, 2019).  2017 Disaster Relief Oversight: Strategy Needed to Ensure Agencies’  Internal Control Plans Provide Sufficient Information. GAO-19-479  (Washington, D.C.: June 28, 2019).

Emergency Management: FEMA Has Made Progress, but Challenges  and Future Risks Highlight Imperative for Further Improvements   GAO-19-617T (Washington, D.C.: June 25, 2019).

Emergency Management: FEMA Has Made Progress, but Challenges  and Future Risks Highlight the Imperative for Further Improvements  GAO-19-594T (Washington, D.C.: June 12, 2019).

Disaster Assistance: FEMA Action Needed to Better Support Individuals  Who Are Older or Have Disabilities. GAO-19-318 (Washington, D.C.: May  14, 2019).

Disaster Contracting: Actions Needed to Improve the Use of Post- Disaster Contracts to Support Response and Recovery. GAO-19-281  (Washington, D.C.: April 24, 2019).  2017 Hurricane Season: Federal Support for Electricity Grid Restoration  in the U.S. Virgin Islands and Puerto Rico. GAO-19-296 (Washington,  D.C.: April 18, 2019).

FEMA Grants Modernization: Improvements Needed to Strengthen  Program Management and Cybersecurity. GAO-19-164 (Washington,  D.C.: April 9, 2019).

Disaster Recovery: Better Monitoring of Block Grant Funds Is Needed.  GAO-19-232 (Washington, D.C.: March 25, 2019).

Puerto Rico Hurricanes: Status of FEMA Funding, Oversight, and  Recovery Challenges. GAO-19-256 (Washington, D.C.: March 14, 2019).

Huracanes de Puerto Rico: Estado de Financiamiento de FEMA,  Supervisión y Desafíos de Recuperación. GAO-19-331 (Washington,  D.C.: March 14, 2019).

High-Risk Series: Substantial Efforts Needed to Achieve Greater  Progress on High-Risk Areas. GAO-19-157SP (Washington, D.C.: March  6, 2019).

U.S. Virgin Islands Recovery: Status of FEMA Public Assistance Funding  and Implementation. GAO-19-253 (Washington, D.C.: February 25,  2019).  2017 Disaster Contracting: Action Needed to Better Ensure More  Effective Use and Management of Advance Contracts. GAO-19-93  (Washington, D.C.: December 6, 2018).

Continuity of Operations: Actions Needed to Strengthen FEMA’s  Oversight and Coordination of Executive Branch Readiness.   GAO-19-18SU (Washington, D.C.: November 26, 2018).

Homeland Security Grant Program: Additional Actions Could Further  Enhance FEMA’s Risk-Based Grant Assessment Model. GAO-18-354  (Washington, D.C.: September 6, 2018).  2017 Hurricanes and Wildfires: Initial Observations on the Federal  Response and Key Recovery Challenges. GAO-18-472 (Washington,  D.C.: September 4, 2018).

Federal Disaster Assistance: Individual Assistance Requests Often  Granted but FEMA Could Better Document Factors Considered.   GAO-18-366 (Washington, D.C.: May 31, 2018).  2017 Disaster Contracting: Observations on Federal Contracting for  Response and Recovery Efforts. GAO-18-335 (Washington, D.C.:  February 28, 2018).

Disaster Recovery: Additional Actions Would Improve Data Quality and  Timeliness of FEMA’s Public Assistance Appeals Processing.   GAO-18-143 (Washington, D.C.: December 15, 2017).

Disaster Assistance: Opportunities to Enhance Implementation of the  Redesigned Public Assistance Grant Program. GAO-18-30 (Washington,  D.C.: November 8, 2017).

Climate Change: Information on Potential Economic Effects Could Help  Guide Federal Efforts to Reduce Fiscal Exposure. GAO-17-720  (Washington, D.C.: September 28, 2017).

Federal Disaster Assistance: Federal Departments and Agencies  Obligated at Least $277.6 Billion during Fiscal Years 2005 through 2014.  GAO-16-797 (Washington, D.C.: September 22, 2016).

Disaster Recovery: FEMA Needs to Assess Its Effectiveness in  Implementing the National Disaster Recovery Framework. GAO-16-476  (Washington, D.C.: May 26, 2016).

Disaster Response: FEMA Has Made Progress Implementing Key  Programs, but Opportunities for Improvement Exist. GAO-16-87  (Washington, D.C.: February 5, 2016).

Hurricane Sandy: An Investment Strategy Could Help the Federal  Government Enhance National Resilience for Future Disasters.   GAO-15-515 (Washington, D.C.: July 30, 2015).

Budgeting for Disasters: Approaches to Budgeting for Disasters in  Selected States. GAO-15-424 (Washington, D.C.: March 26, 2015).

High-Risk Series: An Update. GAO-15-290 (Washington, D.C.: February  11, 2015).

Emergency Preparedness: Opportunities Exist to Strengthen Interagency  Assessments and Accountability for Closing Capability Gaps. GAO-15-20  (Washington, D.C.: December 4, 2014).

Fiscal Exposures: Improving Cost Recognition in the Federal Budget.  GAO-14-28 (Washington, D.C.: October 29, 2013).

Federal Disaster Assistance: Improved Criteria Needed to Assess a  Jurisdiction’s Capability to Respond and Recover on Its Own.   GAO-12-838 (Washington, D.C.: September 12, 2012).

Opportunities to Reduce Potential Duplication in Government Programs,  Save Tax Dollars, and Enhance Revenue. GAO-11-318SP (Washington,  D.C.: March 1, 2011).

1.  Review of U.S. Virgin Islands recovery planning and progress;  2.  Puerto Rico disaster recovery planning and progress;  3.  Drinking water and wastewater utility resilience;  4.  Disaster and climate change impacts on Superfund sites;  5.  FEMA Public Assistance program fraud risk management efforts;  6.  Wildland fire collaboration on fuel reduction efforts;  7.  Preparedness challenges and lessons learned from the 2017  8.  FEMA workforce management and challenges;  9.  Small Business Administration response to 2017 disasters;  10. Development of the GAO disaster resilience framework;  11. FEMA Individuals and Households Program operations and  12. National Flood Insurance Program post-flood enforcement;  13. Emergency alerting capabilities and progress;  14. National Flood Insurance Program buyouts and property acquisitions;  15. Economic costs of large-scale natural disasters and impacts on  16. Community Development Block Grants – disaster recovery;  17. Disaster Housing Assistance Program;  18. Contracting workforce and purchase card use for disaster response  19. Power grid and water projects;  20. National Earthquake Hazards Reduction Program (NEHRP); and  21. Disaster resilience and hazard mitigation.

This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately.

The federal government faces challenges in helping communities recover from disasters. Disaster costs are projected to rise as extreme weather becomes more frequent and intense. Federal disaster assistance since 2005 has topped $450 billion.

We testified that federal recovery programs are complicated and can be slow to provide help. For example, FEMA provided $2.4 billion to help communities recover from wildfires from 2015-2018. Yet, local officials cited challenges in providing housing, removing debris, and meeting FEMA’s paperwork requirements.


State and Local Governments' Fiscal Outlook: 2019 Update

Fiscal sustainability presents a national challenge shared by all levels of government. Since 2007, GAO has published simulations of long-term fiscal trends in the state and local government sector, which have consistently shown that the sector faces long-term fiscal pressures. While a great majority of states have requirements related to balancing their budgets, deficits can arise for reasons including planned annual revenues are not generated at the expected rate, demand for services exceeds planned expenditures, or both, resulting in a near-term operating deficit.

This report updates GAO's state and local fiscal model to simulate the fiscal outlook for the state and local government sector. This includes identifying the components of state and local expenditures likely to contribute to the sector's fiscal pressures as well as the effects of revenue changes on the sector's outlook.

GAO's model uses the Bureau of Economic Analysis's National Income and Product Accounts as the primary data source and presents the results in the aggregate for the state and local government sector as a whole. The model shows the expected level of receipts and expenditures for the sector until 2068, based on historical spending and revenue patterns. In addition, the model assumes that the current set of policies in place across state and local governments remains constant to show a simulated long-term outlook. Because the model covers the sector in the aggregate, the fiscal outcomes for individual states and localities cannot be identified.

GAO's simulations suggest that state and local governments will likely face an increasing difference between expenditures and revenues during the next 50 years as reflected by the operating balance—a measure of the sector's ability to cover its current expenditures out of its current revenues. While both expenditures and revenues are projected to increase as a percentage of United States' gross domestic product (GDP), a difference between the two is projected to persist because expenditures are expected to grow faster than revenues throughout the simulation period. The sector would need to make changes to avoid fiscal imbalance and assure that revenues are at least equal to expenditures.

GAO's simulations suggest that growth in the sector's overall expenditures is largely driven by health care, with states' share of Medicaid spending as the primary driver. These expenditures are projected to grow more than GDP each year. Employee compensation, the largest share of operating expenditures, decreases as a share of GDP during the simulation period. Health benefits are the only component of employee compensation that increase as a percentage of GDP. Revenues from federal grants to states and localities are also expected to increase during the simulation period, in part because of Medicaid grants to states.

GAO also conducts sensitivity analyses to see how the sector's outlook changes when using alternative assumptions of key model variables – economic growth, health care excess cost growth, and the real rate of return on pension assets. Using these alternative assumptions highlights the operating balance's sensitivity to changes and possible shifts in the future fiscal outcomes for the sector.

Fiscal sustainability presents a national challenge shared by all levels of  government. The federal government and state and local governments  share responsibility in fulfilling important national goals and providing  essential services to citizens. State and local governments provide  primary and secondary education, health care, libraries, police and fire  protection services, social programs, roads and other infrastructure,  public colleges and universities, and more. These subnational  governments rely on the federal government for significant portions of  their revenue. Given the nature of the partnership among levels of  government in providing services, understanding potential future fiscal  conditions of the state and local government sector is important for  federal policymaking.

To provide Congress and the public with this broader context, we  developed a fiscal model of the state and local government sector, which  we first reported on in 2007 and have regularly updated since. This  report presents our updated fiscal outlook for the sector based on the  most recently available data and identifies drivers of the state and local  revenues and expenditures that are likely to require attention in the future.  Further, to illustrate uncertainties in the sector’s fiscal outlook, we  developed simulations using alternative assumptions of key model  variables. For information on the model’s key assumptions and our  methodology for developing the model and alternative simulations, see  appendix I.

We conducted our work for this model update from August 2019 to  December 2019 in accordance with all sections of our Quality Assurance  Framework that are relevant to our objectives. The framework requires  that we plan and perform the engagement to obtain sufficient and  appropriate evidence to meet our stated objectives, and to discuss any  limitations in our work. We believe that the information and data obtained,  and the analysis conducted, provide a reasonable basis for any findings  and conclusions in this product.

State and Local Governments Will Need to Make Policy Changes to Achieve Fiscal Balance

Our simulations suggest that the sector will likely continue to face a  difference between revenues and expenditures during the next 50 years,  as measured by its operating balance. We simulated the state and local  government sector’s operating balance—a measure of the sector’s ability  to cover its current expenditures out of current revenues—to understand  the sector’s long-term fiscal outlook based on historical revenue patterns  and other assumptions. Because a great majority of states and many  local governments are required to balance or nearly balance their  operating budgets, the operating balance illustrates the magnitude of  fiscal pressures they face. Expenditures and revenues are both  simulated to increase as a percentage of gross domestic product (GDP)   during the simulation period. However, expenditures are generally  expected to grow at a faster rate than revenues, resulting in a declining  operating balance (see figure 1).

One way of measuring the long-term fiscal challenges faced by the state  and local government sector is through an indicator known as the “fiscal  gap.” The fiscal gap is an estimate of annual changes in expenditures  and in revenues our simulations suggest would be needed to maintain the  operating balance equal to zero during the 50-year simulation period. The  sector could close the fiscal gap through an increase in revenues, a  reduction in expenditures, or a combination of the two of sufficient  magnitude. Our simulations suggest that the fiscal gap is about 3.6  percent of GDP over the next 50 years.

The sector will need to take actions in annually reducing its expenditures  or raising revenues, to achieve fiscal balance. Assuming no change in  simulated expenditures, the sector would need to take actions equivalent  to increasing its total revenues by 4.2 percent each year to achieve fiscal  balance. Alternatively, assuming no change in its simulated revenues, the  sector would need to take actions equivalent to decreasing its noninterest  expenditures by an amount equal to 3.2 percent of its total expenditures  each year. Total expenditure reductions required by the sector are 20.7  percent each year, which includes interest payments on debt that are  simulated to be 17.4 percent of annual spending. To eliminate the fiscal  gap, the sector would most likely take actions that include a combination  of expenditure reductions and revenue increases.

Health Care Cost Growth and Other Factors Contribute to the State and Local Sector’s Fiscal Imbalance

States’ Spending on Medicaid is a Key Driver of Long-Term Expenditures

Our simulations suggest that growth in the sector’s overall expenditures is  largely driven by health care expenditures. Medicaid will likely constitute a  growing expenditure for state and local governments. In 2018, Medicaid  spending was 2.9 percent of GDP compared to 0.85 percent of GDP for  other kinds of health care spending such as non-Medicaid social benefit  payments and employee health benefit contributions. At the end of our  simulations, Medicaid is simulated to be 4.6 percent of GDP and the other  kinds of health care spending are 1.3 percent of GDP. After 2029,  Medicaid spending in our simulations is derived from Centers for  Medicare & Medicaid Services’ (CMS) projections. On average, Medicaid  expenditures are expected to rise by 1 percentage point more than GDP  each year over the simulation period. Breaking this down, Medicaid  expenditures per capita are expected to increase, on average, about 0.6  percent faster than GDP per capita—referred to as excess cost growth.

Excess Cost Growth   The extent to which health care costs per  capita outpace gross domestic product (GDP)  growth per person.

As shown in figure 4, health care expenditures are simulated to increase  from about 3.94 percent of GDP in 2019 to 5.9 percent of GDP in 2068. In  comparison, nonhealth, noninterest expenditures, which include all other  operational expenditures other than debt interest payments, will decrease  as a share of GDP by 2.74 percentage points over the simulation period.  Per capita, national health expenditures, which make up part of the health  care expenditures in the figure below, are expected to grow on average  0.8 percent faster than GDP each year during the simulation period,  according to CMS.

Employee Compensation Decreases as a Share of the Sector’s Expenditures during the Simulation Period

Employee compensation is the largest expenditure for the state and local  government sector. It declines from 6.8 percent of GDP in 2018 to 6.1  percent of GDP in 2068. All spending components, including employee  compensation, are simulated to increase in actual dollar amounts during  our simulation period. Of the spending components included in employee  compensation, only health benefits for employees and retirees increase  as a share of employee compensation. In contrast, wages and salaries,  pension contributions, and other forms of compensation decrease as a  share of employee compensation (see figure 5). These percentages  reflect a simulated decrease in state and local government employees’  compensation as a share of GDP.

Our simulations suggest that spending on health benefits for state and  local government employees and retirees is likely to rise, on average, by  0.9 percentage points more than GDP each year. Similar to the growth in  Medicaid spending, growth in spending for these health benefits is due to  an increase in the simulated number of employees and retirees enrolled  as well as an increase in the simulated amount of health benefits for each  employee and retiree. According to our simulations, if employee and  retiree health benefits follow trends in overall national health spending,  they will likely make up an increasingly larger share of total employee  compensation going forward.

Our simulations suggest that annual contributions to state and local  government employee pension plans will need to remain at their historical  10-year average of 12.9 percent of wages and salaries for state and local  governments to meet their long-term pension obligations. Prior to the  last decade, from 1999 to 2008 the state and local government sector  averaged about an 8 percent contribution rate, which was lower than what  our current simulations show is necessary for meeting pension  obligations. State and local government contributions to employee  pension plans are simulated to decline as a share of GDP, as are wages  and salaries of state and local government employees.

Growth in Federal Medicaid Grants Drives Revenues

Our simulations suggest that federal grants will increase slightly as a  share of GDP. The largest grant receipts are for Medicaid which will likely  grow more quickly than other types of federal grants making up an  increasing share of revenues in the future (see figure 6). The increase in  Medicaid expenditures simulated during this period will likely put  increasing pressure on both federal and state governments. As a  matching formula grant program, the simulated increase in federal  Medicaid grants implies an expected increase in Medicaid expenditures  that will be shared by state governments. Federal investment grants (i.e.,  grants intended to finance capital infrastructure investments) and other  federal grants unrelated to Medicaid (i.e., grants intended to finance  education, social services, housing, and community investment) are  simulated to decline as a share of GDP.

Further, our simulations suggest that if historical relationships between  state and local governments’ tax revenues and tax bases persist, total tax  revenues for the state and local government sector will increase from 8.7  percent of GDP in 2019 to 9.1 percent of GDP by the end of the  simulation period. As shown in figure 7, the different components of total  tax revenues are simulated to remain fairly consistent or slightly increase.  The simulations suggest that personal income tax revenues will increase  as a share of GDP by about 0.5 percentage points during the simulation  period. Sales tax is expected to decrease by approximately 0.2  percentage points and property taxes are simulated to slightly increase as  a share of GDP through 2068 from 2.73 percent to 2.86 percent.

Economic Growth and Other Factors Could Affect the Sector’s Fiscal Outlook

Sensitivity Analysis   An analysis using alternative assumptions of  one variable to determine the uncertainty, or  sensitivity, of another variable.

Several factors, or key model variables, could affect the state and local  government sector’s long-term fiscal outlook, including economic growth,  health care excess cost growth, and the rate of return on pension assets.  To see how the outlook changes in response to them, we developed  sensitivity analyses—simulations that use alternative assumptions about  their growth. For each of these key variables we use a baseline  assumption, a higher-than-baseline assumption, and a lower-than- baseline assumption. We determined that these alternative assumptions  highlighted the operating balance’s sensitivity to changes, shifting the  future fiscal outcomes for the sector.

Future trends in GDP growth could affect the state and local government  sector’s fiscal outlook. In our simulations, GDP growth is based on the  most recent data from the Congressional Budget Office (CBO) and the  Board of Trustees of the Federal Old-Age and Survivors Insurance and  Federal Disability Insurance Trust Funds (OASDI Trustees) which project  real GDP (adjusted for inflation) to grow by 1.9 percent per year on  average from 2018 through 2029, and by 2 percent per year on average  after 2029. Using these projections, our simulations suggest that  maintaining current policies would cause the sector’s operating balance to  become increasingly negative. Using the OASDI Trustees’ alternative  assumptions of real GDP growth at a faster rate—2.7 percent—suggests  that the operating balance, while remaining negative, would have an  improved outlook compared to the baseline.

While growth in revenue and health care spending is largely tied to GDP  in our simulations, spending for other components is tied to inflation and  population growth and grows more slowly than GDP. As such, increases  in GDP growth improve the sector’s outlook. Our simulations, using the  OASDI Trustees’ alternative assumptions also show that if GDP were to  grow at a slower rate—1.4 percent—the difference between revenues  and expenditures would expand, resulting in an increasingly negative  operating balance (see figure 8).

Excess cost growth in health care is another key determinant of the  sector’s fiscal balance. In our simulations Medicaid spending per capita  grows about 1.8 percent faster than GDP per capita on average for the  period from 2020 through 2029. Medicaid spending per capita grows  about 0.6 percent faster on average from the period from 2030 through  2068. Other health expenditures per capita grow about 0.8 percent faster  than GDP per capita for the period from 2019 through 2068. Using these  projections, our simulations suggest that maintaining current policies will  cause the sector’s expenditures to exceed its revenues and this  difference will become increasingly negative during the next several  decades.

The simulations developed assuming zero excess cost growth in  Medicaid and national health expenditures suggest that spending would  be lower as a share of GDP. The difference between revenues and  expenditures would be significantly less negative than the baseline  simulations around the middle of the simulation period before stabilizing,  but remain negative over the simulation period. In the scenario using the  alternative projections from CMS where excess cost growth rises faster— 0.6 percent on average for Medicaid for the period from 2030 through  2068 and 0.9 percent for national health expenditures for the period  between 2019 through 2068—our simulations show that the difference  between revenues and expenditures would persist for the remainder of  the simulation period (see figure 9).

The rate of return on pension assets could also affect the state and local  government sector’s fiscal outlook. Based on an inflation-adjusted rate of  return on pension assets of 5 percent, our simulations suggest that state  and local governments would need to make pension contributions  equivalent to about 13 percent of employees’ wages and salaries to meet  their long-term pension obligations. The simulations we developed using  a higher rate of return—7.5 percent—suggest that pension contributions  would be about 3 percent of state and local government employees’  wages and salaries to meet pension obligations. Under this scenario,  spending would need to be a lower share of GDP and the sector’s outlook  would improve. The difference between revenues and expenditures would  briefly narrow early on before becoming increasingly negative through the  remainder of the simulation period.

Alternatively, we estimated that if the rate of return on pension assets is  relatively low—2.5 percent—required pension contributions would need to  be about 24 percent of state and local government employees’ wages  and salaries. Under this scenario our simulations show that spending  would be a higher share of GDP and the sector’s outlook would worsen  as the sector’s negative operating balance would continue to grow larger  (see figure 10).

This report was prepared under the direction of Michelle A. Sager,  Director, Strategic Issues, who can be reached at 202-512-6806 or  sagerm@gao.gov, and Oliver M. Richard, Director, Center for Economics,  who can be reached at 202-512-8424 or richardo@gao.gov if there are  any questions. GAO staff who made key contributions are listed in  appendix II.

Appendix I: Objectives, Scope, and Methodology

This update of the state and local government fiscal model used  aggregate data on the state and local government sector and national  data on other variables from the following sources: the Agency for  Healthcare Research and Quality, Bloomberg, the Board of Governors of  the Federal Reserve System, the Board of Trustees of the Federal Old- Age, Survivors, and Disability Insurance Program (OASDI Trustees),  BEA, the Bureau of Labor Statistics, the Census Bureau, the Centers for  Medicare & Medicaid Services (CMS), the Congressional Budget Office  (CBO), and the Social Security Administration. These data sources are  generally the same data sources we used for our prior update. We used  annual observations on historical data through 2018 where available.

This report updates GAO’s state and local fiscal model to simulate the  fiscal outlook for the state and local government sector. This includes  identifying the factors that are likely to contribute to the state and local  sector’s fiscal imbalance. The level of receipts and expenditures for the  state and local government sector as a whole in future years is based on  current and historical spending and revenue patterns. We used Table 3.3  of the National Income and Product Accounts (NIPA)—State and Local  Government Current Receipts and Expenditures—prepared by BEA as an  organizing framework for developing our model, and we simulated state  and local government receipts and expenditures using methods similar to  those we have used in prior updates. Our simulations of real U.S. gross  domestic product (GDP) were consistent with the growth path developed  by CBO for the period from 2019 through 2029 and by the OASDI  Trustees for the period thereafter. Our simulations of U.S. population was  consistent with the growth path developed by the OASDI Trustees, and  our simulations of excess cost growth for national health expenditures  and for Medicaid were consistent with CMS projections, all for the entire  simulation period. Our simulations of other variables, such as the GDP  price index, personal income, and 3-month U.S. Department of the  Treasury (Treasury) rates, were consistent with the growth paths for  these variables developed by CBO for as much of the simulation period  as possible. Otherwise, we developed our own assumptions about the  likely future growth path of the variables in our model. In general, we  assumed that current policies remain in place and that all levels of  government continue to provide services at current per capita levels. A  detailed description of the model is in appendix I of GAO, State and Local  Governments’ Fiscal Outlook: 2018 Update, GAO-19-208SP  (Washington, D.C.: December 2018). We describe below where we  updated equations or added equations to the model. Otherwise our  approach is the same as the approach we used in that update.

State and Local Government Sector Receipts

We simulated the future growth paths of the following types of state and  local government revenues: current tax receipts, contributions to  government social insurance, income on financial assets, current transfer  receipts, the surplus from government enterprises, and capital transfer  receipts. We also simulated the future growth path of state and local  government long-term debt issuance. We updated some of the equations  we used to simulate tax receipts(see table 1). We also added equations  to simulate current transfers from the rest of the world to state and local  governments, disaster-related insurance benefits to state and local  governments, and other capital transfers to state and local governments,  which we had not included in prior updates. The equations we used to  simulate the other types of receipts are the same as the equations we  used in GAO-19-208SP.

We simulated the future growth paths of the following types of state and  local government expenditures: consumption expenditures, current  transfer payments, interest paid on outstanding state and local  government debt, subsidies, capital outlays, and consumption of fixed  assets (depreciation). We also simulated the future growth path of the  state and local government sector’s net social insurance fund balance.  We updated some of the equations we used to simulate the interest paid  on outstanding state and local government debt (see table 1 above). We  also added equations to simulate current transfer payments to the rest of  the world, which we had not included in prior updates. Otherwise, the  approach we used to simulate expenditures is the same as the approach  we used in GAO-19-208SP.

State and Local Government Sector Fiscal Balance

Our main indicator of the sector’s fiscal balance is its operating balance  net of funds for capital expenditures (henceforth, operating balance),  which is a measure of the sector’s ability to cover its current expenditures  out of current receipts. Operating balance is defined as total receipts  minus (1) capital outlays not financed by long-term debt issuance, (2)  current expenditures less depreciation, (3) current surplus of state and  local government enterprises, and (4) net social insurance fund balance.

We also estimated the annual changes in spending and in receipts that  our simulations suggest would be needed to maintain the operating  balance equal to zero during the 50-year simulation period, which we  refer to as the “fiscal gap.” As discussed above, our baseline simulations  assume that current policies remain in place and that all levels of  government continue to provide services at current per capita levels. We  then simulated the change in total expenditures needed to maintain the  operating balance equal to zero. To estimate the annual change in  spending needed to maintain balance we calculated the present value of  that change as a percentage of the present value of baseline total  expenditures and as a percentage of the present value of U.S. GDP, all  for a 50-year period. We also calculated the interest and non-interest  expenditure components of the change in total expenditures needed to  maintain balance. We used a similar approach to estimate the annual  change in total receipts needed to maintain balance.

We assessed the sensitivity of our baseline results to alternative  projections of real U.S. GDP growth, health care excess cost growth, and  the real rate of return on state and local government pension fund assets.  Following the same approach we used in GAO-19-208SP, for each of  these variables, we selected an alternative projection associated with  faster growth or rate of return and one associated with slower growth or  rate of return.

Real U.S. GDP. For our baseline simulations, we used CBO  projections of real GDP for the period from 2019 through 2029 and the  OASDI Trustees’ intermediate projections of real U.S. GDP growth for  the years thereafter. For our sensitivity analysis, we used the OASDI  Trustees’ high-cost and low-cost projections.

Health care excess cost growth. For our baseline simulations, we  used CMS’s baseline projection of national health expenditures  excess cost growth and we estimated Medicaid excess cost growth  based on CMS’s baseline projections. For our sensitivity analysis, we  used CMS’s alternative projection of national health expenditures  excess cost growth and we estimated Medicaid excess cost growth  based on CMS’s alternative projections. As another alternative, we  simulated the model assuming both zero excess cost growth for  national health expenditures and Medicaid.  Our simulations used  CBO’s projection of federal spending on Medicaid, CHIP, and  exchange subsidies as a fraction of GDP to simulate certain variables  related to state and local government spending on Medicaid and other  health spending.  This projection incorporates excess cost growth for  the period from 2019 through 2029 but assumes zero excess cost  growth starting in 2030, so we could only vary Medicaid excess cost  growth in the alternative simulations for 2030 and later.

Real rate of return on state and local government pension assets. For  our baseline simulations, we assumed a 5 percent real rate of return  on state and local government pension assets. For our sensitivity  analysis, we used 2.5 percent and 7.5 percent.

Table 2 shows the growth rates or rates of return associated with the  baseline and alternative projections of each variable for the simulation  period.

We simulated the model changing either real U.S. GDP growth, health  care excess cost growth, or the real rate of return on pension assets,  leaving the other variables fixed at their baseline values. Thus, our  sensitivity analysis is in the spirit of a partial equilibrium comparative  statics analysis that sheds light on how each of the individual variables  may affect the state and local government sector’s fiscal outlook.  However, these variables are likely to be correlated, so future changes in  one would likely be associated with changes in others.

Our approach has a number of limitations and the results should be  interpreted with caution. First, the state and local fiscal model is not  designed for certain types of analyses. The simulations are not intended  to provide precise predictions. Even though we know that these  governments regularly make changes in tax laws and expenditures, the  model essentially holds current policies in place and analyzes the fiscal  future for the sector as if those policies were maintained because it would  be highly speculative to make any assumptions about future policy  adjustments.

In addition, fiscal outcomes related to the sector’s financial position and  solvency may not reflect all aspects of the sector’s “health.” Other  indicators include economic indicators that go beyond the sector’s  financial position to include economic growth, income, or distributional  equity, as well as indicators of the quality of services provided by the  sector, including education, health care, infrastructure, and other public  goods and services.

Finally, our unit of analysis is the state and local government sector as a  whole, so our results provide an assessment of the sector’s fiscal outlook.  However, individual state and local governments likely exhibit significant  heterogeneity in their expenditure and revenue patterns and their fiscal  outlooks will likely differ from the sector as a whole. Nevertheless, it is  informative to assess the overall fiscal outlook because doing so reveals  the outlook for state and local governments as a sector. In addition,  aggregate data on the sector is available on a more timely basis than  data for individual state and local governments, allowing for a better  assessment of the sector’s current fiscal outlook. Our results for the  sector also provide a baseline from which to view the experiences of  individual state and local governments. Finally, assessing the fiscal  outlook of the sector as a whole can help mitigate the tendency to  extrapolate from the most visible, but potentially not representative,  experiences of individual states or localities.

Appendix II: GAO Contacts and Staff Acknowledgments

In addition to the contact named above, Peter Del Toro, Courtney  LaFountain, Melissa Wolf (Assistant Directors), Silvia Symber (Analyst-in- Charge), Shelby Clark, Amalia Konstas, Dylan Stagner, Frank Todisco,  Walter Vance, and Alicia White made significant contributions to this  report.

State and Local Governments’ Fiscal Outlook: December 2018 Update,  GAO-19-208SP. Washington, D.C.: Dec. 12, 2018.

State and Local Governments’ Fiscal Outlook: December 2016 Update,  GAO-17-213SP. Washington, D.C.: Dec. 8, 2016.

State and Local Governments’ Fiscal Outlook: December 2015 Update,  GAO-16-260SP. Washington, D.C.: Dec. 16, 2015.

State and Local Governments’ Fiscal Outlook: December 2014 Update,  GAO-15-224SP. Washington, D.C.: Dec. 17, 2014.

State and Local Governments’ Fiscal Outlook: April 2013 Update,   GAO-13-546SP. Washington, D.C.: Apr. 29, 2013.

State and Local Governments’ Fiscal Outlook: April 2012 Update,   GAO-12-523SP. Washington, D.C.: Apr. 5, 2012.

State and Local Government Pension Plans: Economic Downturn Spurs  Efforts to Address Costs and Sustainability, GAO-12-322. Washington,  D.C.: Mar. 2, 2012.

State and Local Governments’ Fiscal Outlook: April 2011 Update,   GAO-11-495SP. Washington, D.C.: Apr. 6, 2011.

State and Local Governments: Knowledge of Past Recessions Can  Inform Future Federal Fiscal Assistance, GAO-11-401. Washington, D.C.:  Mar. 31, 2011.

State and Local Governments: Fiscal Pressures Could Have Implications  for Future Delivery of Intergovernmental Programs, GAO-10-899.  Washington, D.C.: July 30, 2010.

State and Local Governments’ Fiscal Outlook: March 2010 Update,   GAO-10-358. Washington, D.C.: Mar. 2, 2010.

Update of State and Local Government Fiscal Pressures, GAO-09-320R.  Washington, D.C.: Jan. 26, 2009.

State and Local Fiscal Challenges: Rising Health Care Costs Drive Long- term and Immediate Pressures, GAO-09-210T. Washington, D.C.: Nov.  19, 2008.

State and Local Governments: Growing Fiscal Challenges Will Emerge  during the Next 10 Years, GAO-08-317. Washington, D.C.: Jan. 22, 2008.

Our Nation’s Long-Term Fiscal Challenge: State and Local Governments  Will Likely Face Persistent Fiscal Challenges in the Next Decade,   GAO-07-1113CG. Washington, D.C.: July 18, 2007.

State and Local Governments: Persistent Fiscal Challenges Will Likely  Emerge within the Next Decade, GAO-07-1080SP. Washington, D.C.:  July 18, 2007.

What's the latest thinking regarding the fiscal health of state and local governments across the nation?

The 2019 update to our annual outlook on the fiscal condition of states and localities suggests that the sector will have an increasingly tough time covering its bills over the next 50 years. Although our model shows revenue will increase, spending will likely rise faster—driven largely by health care costs, including Medicaid spending. Revenues may be insufficient to sustain the amount of government service currently provided.