State and local government public services and benefits are getting squeezed. There is less money available for them because of rising costs from the past, notably under-funded and retroactively enhanced pensions for public employees who are already retired or soon to retire. In some places, as noted in the prior post on taxes, this squeeze has been exacerbated by falling taxes as a percent of personal income. The total wages and salaries of those public employees who are still working are falling as a percent of taxpayer personal income just about everywhere, as is spending on services for the needy (other than those associated with health care). And the anecdotal evidence suggests that since FY 2014, the latest year for which data is available, the squeeze has gotten worse. Despite the third biggest stock bubble in history by one measure,
which makes public employee pensions seem better funded than the really are, years of zero percent interest rates, which reduce state and local government interest costs, and a long-running economic upcycle, which has boosted tax revenues.
Whatever this data shows, things have gotten worse since in most of the U.S.