Will rising Medicaid costs will impact higher education spending?

According to a new study, there is correlation between the rising cost of Medicaid and declined spending on higher education. Created by Moody’s Analytics for The National Commission on Financing 21st Century Higher Education, the study suggests that state budgets will constrict spending on higher education because of the high cost of Medicaid.

Because money from the Affordable Care Act will start to slow by 2020, many states will have to allocate more funds for Medicaid, which in turn will cause a decrease in discretionary spending.

So, many states that are struggling with budget deficits or have deeply cut funding for higher education will likely face more financial issues.

The study portends that Medicaid will outrun state revenues. If that potential trend holds, then higher education truly is in trouble.

To further foreshadow the problem, higher education spending is only expected to grow by as little as four percent each year. Any growth may look good on the surface but that type of spending will likely cause many colleges and universities to reshuffle their spending priorities.

Currently Louisiana’s budget crisis is causing Governor Bobby Jindal to look at cutting a record $600 million from higher education. Because of the loss of funding, Louisiana State University (LSU) may file for academic bankruptcy. That will mean that LSU will be forced to raise tuition and student fees, likely pricing some students out of attending the university.

Likely more states that face this crisis of funding will attempt to raise revenues and cut higher ed funding. Unfortunately education funding is usually the first to get cut when state funding gets tight. Because this issue isn’t supposed to shock state budgets for at least another five years, hopefully states will take precautions now to prepare for the issues down the road.

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