August 6, 2007 Fiscal Challenges Loom for State and Local Government
A new study released by the U.S. Government Accountability Office (GAO) predicts that large and growing fiscal challenges will confront state and local governments in the coming years. Absent policy changes, the study finds that within the next decade expenditures will exceed revenues in the state and local government sector, resulting in a deficit. It is no surprise that the largest burden in future expenditures is going to come as a result of health care expenses.
The GAO state and local model projects the level of receipts and expenditures of the sector in future years based on current and historical spending and revenue patterns. The report concluded, “In particular, two types of state and local expenditures will likely rise quickly because of escalating medical costs. The first is Medicaid expenditures, and the second is the cost of health insurance for state and local employees and retirees.