Medicaid Expenditures Now Account for Nearly 30% of State Spending

For the first time, U.S. state spending topped $2 trillion in fiscal 2018, driven by an increase in Medicaid expenditures, according to National Association of State Budget Officers’ (NASBO) annual state expenditure report. Total state expenditures, which includes both state and federal funds, grew an estimated 4.8% compared to 3.8% in fiscal 2017.

NASBO’s annual report focuses on the seven top state spending categories, which are elementary and secondary education, higher education, public assistance, Medicaid, corrections, transportation and “all other.”

Each category experienced growth in fiscal 2018, although Medicaid experienced the most, at 7.3%. Medicaid expenditures now account for 29.7% of total state expenditures, compared to 20.5% a decade earlier.

Transportation spending increased 6.5%, indicating a greater focus on infrastructure and representing 8% of total state expenditures, while elementary and secondary education expenditures rose 4.6%.

General fund revenue grew in fiscal 2018 by 6.2%, the highest growth rate since fiscal 2011. The report didn’t indicate how much of that revenue, mostly comprised of income and sales tax, was nonrecurring.

Growth in state spending of federal funds outpaced spending of state-generated revenue, including from general funds, the report found. “We’re seeing a slight increase in the growth of spending both from total spending and states’ own funds,” said NASBO Executive Director John Hicks.

Looking forward, NASBO predicts that states will benefit from growth in state revenue collections. At the same time, they’re also dealing with long-term spending pressures from rising healthcare costs, pensions, and school infrastructure, among other expenses, according to the report.

Fiscal 2018 ended for most states on June 30.

For questions, comments or concerns, please contact Jennifer Duell Popovec