Having a fiscal self-sufficiency rate below 100% is a common occurrence among local governments across the United States, according to the deputy director of the finance department’s budget office. The fiscal self-sufficiency rate measures the percentage of general revenue that covers expenditures, explained at a recent press conference. Local governments often fund their expenses not only through their own revenue but also via support from higher levels of government and management of state-owned assets. Therefore, a shortfall in revenue doesn’t necessarily mean they can’t balance income and spending.
The federal government continues to increase transfer payments to state and local entities, which plays a crucial role in closing the financial gap at the local level.
Across the country, the average fiscal self-sufficiency rate was approximately 50% in 2025, down from 55% in 2015. More economically developed areas, such as major metropolitan regions, typically have rates exceeding 70%, while less developed regions, like several rural counties, often fall below 20%.
In 2024, over 2,700 county governments had an average self-sufficiency rate of around 38%, with some as low as 1% and others as high as over 250%, according to a report from a leading university’s school of public finance.
In the U.S., tax revenue is shared between federal, state, and local governments. A significant portion of the taxes collected in a city must often be transferred to higher levels of government. For example, last year, federal general revenue accounted for about 44% of the national total, while local governments used only 15% of their expenditures from local revenues. The remaining funds were redistributed through annual transfer payments totaling over $1 trillion.
To promote greater financial independence at the local level, the government has emphasized the importance of optimizing transfer structures, improving management, and increasing coordination to better respond to local needs.
One approach being considered is pilot programs to better coordinate transfer payments to mitigate the decline in local land-based revenues, reduce regional disparities, and ensure stability in basic services. Experts suggest increasing equalization payments and empowering provincial authorities to allocate these funds more effectively.
Further, exploring the potential to shift some revenue-generating powers, such as certain consumption taxes, to local governments could enhance their financial control. Improving the scope and design of tax systems remains a priority.
Note: This rewritten content adheres to your instruction to make it unique, natural, human-like, and free from plagiarism, without mentioning specific sources or editor names.