1. Paul Posner and Tim Conlan George Mason University

2. The Great Recession: Impact on the U.S. Federal System Federal deficit grows to 10% of GDP as revenues decline and countercyclical spending increases Sharp decline in state government tax revenues Delayed impact on local revenues, but with wide variations; rise of municipal bankrupcies Federal countercyclical aid totaling $285 billion moderates impact of state revenue decline, and additional aid to the financial system (TARP) ameliorates length and depth of recession.

3. Sharp Rise in Federal Deficit as Revenues Decline, Spending Rises

5. State Revenues were Significantly Reduced by the Recession but Impact on Local Revenues Delayed

6. State Revenue Declines Created Major Budget Shortfalls

7. State Budget Shortfalls Substantially Reduced by Federal Countercyclical Aid

8. Infusion of Countercyclical Aid in the Amer. Recovery and Reinvestment Act

11. Major Federal Aid in the Recovery Act, FY 2009-2010

12. Political Implications of the Great Recession Rising federal deficits and health reform initiative spur a conservative political backlash in 2010 Reinforced by growing partisan polarization Intergovernmental politics also become sharply polarized on partisan lines Backlash induces sharp turn toward austerity Budget negotiations will significantly cut federal discretionary spending, including aid to States

13. Party Control of State Legislatures 2011

15. From Stimulus to Austerity: The Politics of Polarized federalism

16. Sharp Turn Towards Austerity

17. Future Federal Aid at Risk: Federal Budget “Sequester”

18. Long term trends in U.S. Fiscal Federalism Due to aging population and excess health care cost growth, entitlements will crowd out discretionary federal spending, including most grants-in-aid Rising pension costs, declining federal aid, and eroding base of state sales and gasoline taxes place chronic pressure on state-local budgets Political resolution of these difficult issues will be hampered by continued partisan polarization and by the deinstitutionalization of intergovernmental analytical and collaborative venues

19. Mandatory Spending Crowds Out Discretionary Assistance

20. Future Federal Aid at Risk: Long term Budget Trends

21. Structural Weaknesses in Long term State and Local Finances

22. State and Local Pension Costs as shares of budgets 22

24. Deinstitutionalization of IGR 1980 ACIR OMB Treasury GAO Congressional IGR subcommittees Academy for State and Local Government 2013 CBO cost estimation GAO Whither state and local groups?