State and Local Governments: Growing Fiscal Challenges Will Emerge during the Next 10 Years

The GAO has released a new report showing “the growth in health-related costs serves as the primary driver of the fiscal challenges facing the state and local government sector. 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. At the same time, most revenue growth is expected to remain roughly flat as a percentage of Gross Domestic Product. As such, the projected rise in health-related costs is the root of the fiscal difficulties these simulations suggest will occur.”  The report includes projections through the year 2050, at which point state and local health spending is expected to equal state and local spending on all other services.  Full report