Abstract
Some policymakers are concerned that many state governments will lack the fiscal capacity to assume devolved responsibilities, meet demands for traditional state services, and provide adequate aid for local governments. This study evaluates the fiscal capacity, fiscal need, and tax effort of the fifty states and the District of Columbia, following the approach developed by the U.S. Advisory Commission on Intergovernmental Relations. The study also analyzes Census and NIPA statistics to gain insights into the capacity of states to meet the challenges and exploit the opportunities of the new federalism.