Overall, spending increased by 8.6 percent for the fiscal year or, when adjusted for inflation, 5.3 percent. That was roughly the same growth rate as 2006 and the third straight year that inflation- adjusted spending increased.
Most states don't expect widespread revenue problems next year. Only six governors are recommending lower overall expenditures. Nationally, state spending is expected to rise by 4.2 percent, a modest increase even when taking into account inflation.
Nonetheless, states face long-term fiscal challenges, most notably from Medicaid, which is increasing at a slower rate than a few years ago, but in 2007 accounted for 22.2 percent of state spending.