Health care spending, already one of the heftiest budget categories for most state and local governments, is going to take an increasingly bigger slice of the pie in coming years. Ultimately, that could be devastating for state and local governments’ fiscal health, writes David Lind, principal of David P. Lind Benchmark in Clive. 

Lind cites a recent study by Fitch Ratings, which estimates that health care and social services budgets would increase from 27.6 percent of state and local spending in 2005 to an estimated 38.3 percent by 2025. 

“Consequently, budgets for state and local spending for education, transportation/public safety/environmental and housing would each decrease, largely due to being crowded out by growing healthcare costs,” Lind wrote. “Their analysis states (suggests) that rising health insurance costs and retirement rates will increase budgetary pressure on U.S. state and local governments – which will adversely impact their financial ratings.” 

Teachers are particularly feeling the brunt of rising health insurance costs, as they’re squeezed between shrinking funding from state and local governments and rising premiums. Lind cited a Kaiser Health News article that found state and local governments paid 14.5 percent more for teachers’ health coverage than they did 10 years ago, adjusted for inflation. 

“Inaction during this time (2018-2025) by local and state policymakers and administrators will only cause this problem to fester – the proverbial ‘can being kicked down the road’ for later generations to tackle,” Lind said. “State and local budgets cannot afford this to happen, not now, and certainly not in the future.”