Prisons, Medicaid and Pensions Costs Are Crushing State Budgets

wisconsin capitol

Photo: Ray Cunningham via Flikr

State budgets have been “ravaged” by increasing costs and declining revenues caused by years of economic malaise, the Associated Press reports.A review of 50 state budgets reveals that many state governments are facing difficult setbacks on the road to economic recovery. One of those setbacks is the gradual elimination of federal stimulus assistance this summer and beyond.

The economic downturn has taken a severe toll on state finances, and it continues to complicate efforts toward stabilisation.

Here are a few highlights from the report:

  • “Some states are in far worse shape. New Jersey, Nevada, Oregon, Illinois and Louisiana reported deficits that are more than 20 per cent of their state’s general fund.”
  • “States with the highest per capita number of Medicaid recipients were among those with the largest budget deficits, as a percentage of general fund revenue.”
  • “Seven states are spending 10 per cent or more of their general funds to pay for their prison systems.”
  • “All 50 states have a combined $689.5 billion in unfunded pension liabilities and $418 billion in retiree health care obligations. Five states have unfunded public employee pension liabilities of $50 billion or more.”

While some states—California, New York, and Illinois, for instance—have increased revenues by raising taxes, deficits will continue to grow until the costs of retiree health care and pensions are brought under control.

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