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date: 25 August 2019

Abstract and Keywords

History will write the two-year period of 2009 to 2010 as a watershed in the federal-state-local fiscal relationship. The outpouring of aid helped states to avoid cutting spending and increasing taxes in the depths of the Great Recession. Federal grants dramatically increased as a percentage of total state revenues, from 26 percent to 35 percent. The fiscal relief packages were harbingers for the future, because 70 percent of the federal grants were devoted to health and education. But the relief supplied by the federal stimulus was short-lived. The expected “new normal” revenue path means that states will continue to downsize and streamline along all fronts. Health-care spending holds the key. Existing health programs and the new Affordable Care Act, if is fully implemented, will mean that 130 million individuals will look to the states to help meet or, at least, control health-care costs. That is the difficult and expensive mission confronting the states in the future.

Keywords: grant system, Great Recession, federal grants, state revenues, health and education, health programs, federal stimulus

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