Study: Federal Money Often Triggers More State Spending

Dec 22, 2015

A new analysis conducted by an economist out of Portland, Oregon and published by the Civitas Institute, a Raleigh-based conservative think tank, finds that federal spending often triggers more spending by state governments.  The findings were highlighted in an editorial published in the News & Observer of Raleigh.  Eric Fruits, the study's lead author, notes that federal money often comes with strings attached, whether through required matching funds or with so-called "maintenance of efforts" conditions "requiring states to prolong the funding after a certain timeframe."

Dr. Fruits' research does not specifically look at the issue of Medicaid expansion, but the Civitas Institute used his data as one argument against expansion in the N&O editorial.  Republican lawmakers across the country, including in North Carolina, have resisted expanding Medicaid under the Affordable Care Act.  When the Supreme Court initially upheld the ACA as constitutional, it ruled that states could not be compelled to expand Medicaid.  Critics have argued North Carolina is missing an opportunity to extend coverage to the poor.  Other studies have made economic arguments in favor of expansion, including one commissioned by the Greensboro-based Cone Health Foundation that WCQS covered earlier this year.

Eric Fruits is president and chief economist at Economics International Corp. and an adjunct professor of economics at Portland State University.

In the interview above, I spoke with Dr. Fruits about his research and about whether he thought expansion of Medicaid would be in North Carolina's best interest.  Below are the initial background questions I asked Dr. Fruits that I've separated from the main portion of the interview.