US states' financial woes likely to erode services

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WASHINGTON (AP) — U.S. states face long-term budget burdens that are already limiting their ability to pay for basic services such as police, local schools and transportation, a report says.

Aging populations and rising health care costs are inflating Medicaid and pension expenses. At the same time, revenue from sales and gas taxes is shrinking. And grants from the federal government, which account for about one-third of state revenue, are likely to shrink.

Those challenges are made worse by a lack of planning by many states and the repeated use of one-time accounting gimmicks to cut costs, the report says.

The report was issued by the State Budget Crisis Task Force, a non-profit group co-chaired by former Federal Reserve Chairman Paul Volcker and former New York Lieutenant Governor Richard Ravitch.