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GAO Predicts Increase in State Budget Gaps

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GAO Predicts Increase in State Budget Gaps

April 26, 2012

The Government Accountability Office's (GAO) annual report on state and local fiscal health cites rising health care costs, particularly in the Medicaid program, as being the key driver in larger budget gaps than had been predicted at this time last year.

The report assumes that the Affordable Care Act will be upheld, which would allocate more federal funds to Medicaid starting in 2014. Despite this anticipated increase, states will continue to see shortfalls in the revenues required to administer the Medicaid program as their expenses will grow at a faster rate.

GAO recommends that states cut current spending by an average of 13 percent and maintain lower spending levels in the future in order to compensate for the predicted budget shortfalls.