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December 13, 2002

Report: Health-care spending has increased much faster than aid to schools, higher education

New York State's Medicaid spending has grown almost twice as fast as aid to schools since fiscal 1988 and even faster compared to spending on higher education, a Dec. 13 fiscal analysis by The Public Policy Institute of New York State shows.

The report is the latest in The Institute's Budget Watch '03 series. The new report is posted at www.ppinys.org/budget/budget_watch_03_issue10_health.pdf.

"In the last 10 years, spending on Medicaid has risen from 12.8 percent of the state-funds budget to 14.7 percent," the report noted. "Meanwhile, the percentage spent on education (including elementary, secondary, and higher education) is down a bit, from 36 percent to 35.8 percent."

"Moreover, these figures understate growth in state spending on health care because the Health Care Reform Acts of 2000 and 2002 added billions of off-budget dollars," the report added. The report noted that an estimated $1.2 billion or more of spending through HCRA "is controlled and accounted for entirely outside the state's financial plan. Not just outside the General Fund, but literally off-budget."

Neither the state Division of the Budget nor the Department of Health has released a full accounting of HCRA's revenues and expenditures, the report noted. The Citizens' Budget Commission, an independent government budget watchdog group, "has estimated that 80 percent of long-term funding for HCRA 2002 is unlikely to materialize, or is non-recurring in nature," the report said.

Since 1988, state Medicaid spending has increased 156 percent, while school aid has increased 81 percent and aid to higher education has increased 65 percent, the report said, citing data from the state Comptroller's Office.

The report noted that the financing of HCRA "looks increasingly shaky" because anticipated increases in federal aid have not materialized, sales of taxable packs of cigarettes are down, and the state is considering diverting its tobacco-settlement money into a one-time borrowing.

"Fortunately, HCRA expires in June 2003. This will afford Governor Pataki and the Legislature an opportunity to reshape the state's priorities by reforming our health-care programs," the report concluded.

The Institute, the research affiliate of The Business Council, launched Budget Watch '03 earlier this month to focus attention on spending issues that are at the root of the state's looming fiscal challenge. If the state had held overall state-funds spending to the rate of inflation over the last five years, the state could have saved $7.9 billion in the current year.

All 10 reports in the series can be accessed from www.ppinys.org/bwatch03.htm.