States are caught in a fiscal vise as weak economic growth, dwindling federal help and increasing appeals from hard-pressed local governments squeeze their budgets.
Things have improved since the worst of the recession, but states still face a dire fiscal situation, according to a report to be released Tuesday by the National Governors Association (NGA) and the National Association of State Budget Officers (NASBO).
The Fiscal Survey of States says that even as states struggle with tepid revenue growth, they will be called on to spend more because of the economic distress caused by continued high unemployment.
The report says that Medicaid, the combined federal-state health program for the poor and the disabled, will place the biggest budgetary burden on states. Because of increasing caseloads, declining federal help and spiraling health-care costs, state Medicaid spending is growing much faster than state revenue, crowding out funding for other priorities.
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