In the past few years, the fiscal conditions of state and local governments have stabilized, but improvements have been uneven. Key trends include:

• Greater stability in state fiscal conditions with 32 states reporting balance increases and the median rainy-day fund balance rising to 6.4% as a share of general fund spending in FY 2018, from a recent low of 1.6% in FY 2010.
• City fiscal conditions in 2018 show signs of weakening as tax revenue growth has slowed. In fiscal year 2017, property tax revenues grew 2.6% compared to 4.3% in 2016. Sales tax revenues grew 1.8% compared to 3.7% in FY 2016. Income tax revenues grew 1.3% compared to 2.6% in 2016.  
• As a result of the 2017 tax reform law, state and local governments can no longer use tax-exempt bonds to advance refund outstanding bonds. Advance refunding bonds helped issuers save more than $14 billion from 2012-2017, reducing taxpayer and ratepayer burdens.
• The average funded level of state and local pensions was 72% in 2017; 20% of pension plans were less than 60% funded.  

Read the report here.