SOMBER FISCAL OUTLOOK


The findings indicate that even as many state and local governments close their current budget deficits with regular sources of revenue (and not short-term fixes), all 50 states will face a gap between projected revenue growth and the projected cost of public services. Additionally, projected state revenues will not support real increases in spending.

Since state and local governments have substantially increased real per-capita spending in each of the last five decades, this conclusion suggests that either:
State residents would have to scale back their appetite for government services.
  or:
State residents would have to accept tax increases to finance new growth.
The study also finds, in 46 states, growth in demand for other services (such as K–12 education, social services, corrections, and Medicaid) will be greater than growth in demand for higher education. The rapidly escalating costs of Medicaid, more than anything else, explain why total state and local spending is projected to grow faster than spending for higher education. (Only in Nevada, New Jersey, Illinois, and Arizona are higher education's requirements expected to grow more rapidly than the needs of other state and local programs.) Continuing support for these other services will place enormous pressure on higher education budgets.


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