The current economic downturn has most Americans clinging tight to their wallets. But a new analysis shows that state and local governments have increased spending, which could mean fiscal trouble in the near future.
The second quarter of fiscal year 2008 saw state and local spending jump by 7.8% over the same period last year, while revenue rose by a mere 2.5%, USA Today reported. Government hires have increased as well, with many states adding new teachers, policemen and prison guards, says the report. But the boom times can’t last, especially in the current recessionary climate. California Gov. Arnold Schwarzenegger (R) has already laid off 22,000 part-time state employees and reduced 200,000 others to minimum wage over projections that the state will overspend its income by $15 billion this year, according to the report.
While such increases in state spending can lead to improvements in social services such as healthcare and education, the practices are often unsustainable and could eventually lead to significant cutbacks, the newspaper said. Many experts are predicting that other states will follow California’s lead and start cinching their purse strings in significant ways. State budget cuts often involve reductions to Medicaid spending, which helps fund nursing-home care.
