State spending last year grew at its fastest pace since before the recession, thanks mostly to an infusion of spending through Obamacare.
A big reason for the sudden spike were the hotly controversial funds available to states to expand Medicaid, NASBO found. Medicaid funds grew by $41.8 billion, while all other federal funds to states were scaled back by about $3.4 billion.
“The large increase in total state expenditures doesn’t mean that states are flush with cash because the monies they get from their own fund sources have only increased slightly due to modest economic growth,” NASBO Executive Director Scott Pattison said in a statement accompanying the report. “The increase seen in total state expenditures is heavily tied to increased federal Medicaid funds so states don’t actually have a lot of additional money to fund other priorities like education or infrastructure.”
Medicaid accounts for a fifth of state spending
More than 25 percent of all state spending goes to Medicaid, according to NASBO, with K-12 education account for nearly 20 percent and higher education account for roughly 10 percent. But when it comes to their own funds, K-12 spending dominates among states, accounting for 1 in every 4 dollars spent.
States have become increasingly reliant on federal money
In fiscal 2008, roughly 46 percent of overall spending came from their own general funds and 26 percent came from federal funds. By fiscal 2014, it’s estimated that general funds now account for just over 40 percent of total spending, while federal funds account for more than 30 percent of spending.
Public assistance spending shrank
State spending rose in every spending category but one: public assistance. While education, Medicaid, corrections, transportation and all other categories grew by at least 3.7 percent, public assistance shrank by 1.4 percent.