What is a fiscal gap?

Filed in Fiscal Gap Q & A

What is a fiscal gap? Is it more than just a fancy way to say deficit? Any government can run a deficit in a bad year when revenues falls short of expenses. Bad years happen, especially in a down economy when tax receipts – or in Alaska’s case, oil prices – are lower than expected. Borrowing to cover such cyclical deficits can eventually be repaid in good years when the economy recovers and the government has a surplus.

A fiscal gap describes a different kind of deficit – a persistent or structural deficit – that occurs when a government’s regular sources of revenue are insufficient to meet its general level of spending even in good years.