Although states experienced stable finances in 2007, somewhat tighter fiscal conditions are expected in 2008, according to a report released last week by the National Governors Association (NGA) and the National Association of State Budget Officers (NASBO). The report cites healthcare costs as a large contributor to increased state spending.
The report, The Fiscal Survey of States, indicates that although most states expect reasonable revenue growth during FY08, some states already are seeing significant slowing of their fiscal conditions. States expect continued expenditure pressures in areas such as health care, education, corrections, employee pensions systems, and infrastructure.
“The steady rise in healthcare costs continues to be a dominant force of increased state spending,” said NGA executive director Raymond C. Scheppach. “Governors realize that meeting these ever-increasing expenditure expectations with limited revenues will be problematic in the future.”
Medicaid is approximately 22 percent of total state spending, while all health care accounts for 32 percent--the single largest spending area. Thirty-four governors introduced proposals to reduce the number of uninsured residents in their states during FY08. These include expanding the State Children’s Health Insurance Program, increasing individuals’ access to private insurance, and using traditional Medicaid expansion and flexibilities offered under the Deficit Reduction Act, along with various other state programs. Proposed FY08 funding for these programs totals nearly $18.4 billion.
