The 50 states spent more than $2 trillion for the first time in fiscal 2018, according to a report released Thursday by the National Association of State Budget Officers. At the same time, as the economy continued to expand, most states also saw stronger revenue growth, with personal income tax collections up 8.7 percent. “As a result of revenues coming in above forecast, many states ended fiscal 2018 with a budget surplus,” the report says.
Part of that revenue boost was likely of a one-time nature, though, and the group says that states expect more modest revenue growth going forward. It adds that states “continue to contend with long-term spending pressures in areas ranging from health care and pensions to adequately funding K-12 and infrastructure” — as well as some uncertainty about federal funding to states in 2019 and beyond.
The report examines spending across seven main categories: elementary and secondary education, higher education, public assistance, Medicaid, corrections, transportation and “all other.” It estimates that spending grew in each of the seven areas. You can find a useful summary of the full 124-page report here. Some key details about 2018 state spending:
- Total state spending grew by 4.6 percent, up from 3.8 percent in fiscal 2017. Spending from states’ funds grew by 4.1 percent while spending from federal funds rose 5.7 percent.
- Total state spending has grown (on a nominal basis) every year since 2012, when spending dropped for the first time in the report’s 32-year history. But spending growth in both 2017 and 2018 was below the average of 5.6 percent (not adjusted for inflation) over the 32 years the report has been produced.
- Total spending on Medicaid, the healthcare program for the poor, saw the largest percentage increase in fiscal 2018, 7.3 percent. Medicaid spending totaled $603 billion, up from $562 billion in fiscal 2017. More than 56 percent of state spending growth over the last six years is attributable to the health insurance program, the report says.
- Medicaid spending continues to climb as a percentage of state spending. The program accounted for 29.7 percent of state expenditures in fiscal 2018, up from 20.5 percent in 2008. Medicaid also makes up a rising share of federal dollars spent by states. Nearly 60 percent of federal funds received by states in fiscal 2018 were for Medicaid, up from 43 percent a decade earlier.
- Transportation spending grew by 6.5 percent in 2018 and represented 8 percent of total state expenditures.
- Expenditures for elementary and secondary education rose by 4.6 percent and remained the largest area of state general fund spending (nearly 36 percent).
- Public assistance spending grew the least in fiscal 2018, up 0.7 percent. Public assistance was also the only category of spending to decline in fiscal 2017.