What Accounts for the Large Increase in State Spending?

Governing: “States increased their spending in fiscal year 2015 by the biggest margin in more than 20 years, but most of the increase was thanks to huge leaps in Medicaid spending under the first full year of the Affordable Care Act.”

“Spending increased last fiscal year, which ended on June 30 for most states, by 7.8 percent, according to new estimates from the National Association of State Budget Officers (NASBO). It’s the biggest boost since 1992 and was thanks to a 15.1 percent increase in Medicaid spending, much of that paid for via federal Medicaid funds. Illinois, Michigan, Kentucky, Nevada and Oregon saw more than 30 percent increases in federal funding because they expanded Medicaid under the ACA.”

“Still, all is not great for state fiscal health. On average, state revenues aren’t keeping pace with spending; NASBO estimates General Fund revenues will increase by just 3.8 percent. That is likely because some states are still having trouble balancing their budgets, as a handful transferred money from special funds or dipped into savings to close 2015 in the black, said Sigritz.”

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