State troubles

Date posted: August 14, 2012

Most states, including North Carolina, have faced major economic challenges in recent years with the recession, high unemployment, and balancing budgets. Does it look to get any easier for states in the future? N.C. State University economist Mike Walden answers.

“Well …, if we believe a new report that was commissioned to look at the future of states, the answer would be no. This report expressed concern in several areas about the future economies of states and let me tick off some of those concerns.

“One is growing Medicaid expenditures. Medicaid has risen to be one of the major expenditures for states. That is, of course, a federal-state shared program, but states do kick in money. And this report expressed a concern about whether states will be able to continue to afford their part down the road of Medicaid. So that’s one problem.

“Second problem: With the federal government itself facing problems, the report said to look for less federal monetary aid from the federal government to states. For example, states got a big stimulus of money from the federal government a couple of years ago. This report is saying don’t necessarily look for that in the future, because the Feds are under pressure to balance their own budgets.

“Third area expressed concern about with state retirement systems, many of them are under-funded. Now I should say North Carolina looks very good here. We have a very well-funded retirement system. Nevertheless, something to watch down the road.

“And then lastly local governments are also under stress, particularly with the collapse of the real-estate market. What that has implied for property tax revenues — which are a major source of funding for local governments — many of those local governments may be looking to their states for help, and yet the states are also under physical stress.

“So, a lot of issues (are) facing states and localities in the future.”

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