Sunday, July 10, 2005

Entitlements and States

JULY 2005

The States are doing far better than they were in 2003, but a lot of it may be illusionary. Spending growth has been close to the traditional average, but a lot of that growth was generated by One-Time Federal assistance which will not be repeated. Based on submitted Budgets by Governors for fiscal 2006, Spending growth will be 3.8%, almost half of the 6.5% average over 27 years. The trouble comes in the fact Spending reductions are needed because of Entitlement overruns, and Spending Cuts are often made in necessary apropriations to serve the cause of Entitlements.

Medicaid remains the worst culprit, with 20-24 States experiencing Medicaid shortfalls in 2004-05. The situation can only get worse, as Medicaid enrollments continue to increase (currently 53 million people--largest Medical program existent), and Federal Budgets are being passed reducing Federal underwriting of the Medicaid program. Total Medicaid shortfall for 2004-05 was estimated at $5.8 billion, with Federal reductions from the Medicaid program in excess of $25 billion over the next several years. Medicaid represents 22% of State Spending currently, and is increasing at 8.8% per year, while State revenues are currently increasing at about 2.1% per year.

According to the most recent edition of
NASBOƂ’s State Expenditure Report, estimated fiscal
2004 state spending from all sources is nearly $1.2
trillion, with the general fund representing 43.5 percent
of the total. The components of total state spending
are: elementary and secondary education, 21.5
percent; Medicaid, 21.9 percent; higher education,
10.5 percent; transportation, 7.9 percent; corrections,
3.4 percent; public assistance, 2.1 percent; and
all other expenditures, 32.6 percent.

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