
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: TUESDAY, July 27, 1993                   TAG: 9307270159
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A-2   EDITION: METRO 
SOURCE: Los Angeles Times
DATELINE: SAN DIEGO                                LENGTH: Medium

HIGHER EDUCATION FALLS BEHIND HEALTH SPENDING

For the first time, states now spend more on health care than on higher education, according to a study released at a conference of state legislators here Monday.

The study found that state spending on Medicaid, the joint state-federal program that provides health care for the poor, soared by 17.6 percent in fiscal 1993 and now exceeds the amount states spend on higher education by one-sixth.

With medical costs expected to rise again this year, the study projects that states are likely to spend as much as 22 percent more on Medicaid than higher education in fiscal 1994.

"The costs of health-care spending are growing more rapidly than we have the capacity to raise revenue" to pay for it, said Arizona state Rep. Art Hamilton, president of the National Conference of State Legislatures, which conducted the study.

Still, the survey indicated that the pressure on the states from health-care costs may be moderating. In 1994, state spending on Medicaid is expected to rise 7.5 percent, still greater than overall state spending, but far below the nearly 20 percent annual increases of the past few years. Officials attributed the slowdown to reductions in the cost increases for medical services and a slackening in caseload increases as the economy improves.

But, the report cautioned that states have generally underestimated the growth in Medicaid costs before and suggests that the 7.5 percent estimate "should be regarded as a minimum growth rate, not a realistic forecast, if past events are an accurate guide."

Overall, the study found the financial condition of most states "in better shape than they have been for a number of years."

State taxes are expected to rise $3.8 billion in 1994, an increase of 1.2 percent over current collections. That's roughly the amount state taxes increased this year - a figure sharply below the nearly $26 billion states raised in new revenues during the recession years of 1990 and 1991. Only five states enacted tax increases for 1994 greater than 5 percent.

Along with health-care costs, states are also being squeezed by rapid increases in prison expenditures swelled both by court mandates to improve prison conditions and legislative decisions to toughen minimum mandatory sentences.

by CNB