By Michael A. Fletcher,
Friday, December 14, 2012

Just as state governments are healing from the deep fiscal wound inflicted by the Great Recession, they are confronted by the dual threat of reduced federal help and ever increasing health-care costs, according to a new report.

Governors are bracing for substantial cuts in federal aid in the immediate future, even if Washington policymakers agree on an alternative to a series of budget cuts and tax increases set to go into effect in January.

Meanwhile, the spiraling costs of Medicaid, employee health insurance premiums and retiree health care would make it nearly impossible for states to fill the gap caused by expected federal cuts. That means service cuts initiated during the recession would have to go deeper, the report warned.

“To the extent the federal government wants to cost-shift, we don’t have the money at the state level to make up for that,” said Scott D. Pattison, executive director of the National Association of State Budget Officers.

The Fiscal Survey of States, a report released Friday by NASBO and the National Governors Association, found that state revenues for the current fiscal year surpassed pre-recession levels for the first time.

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