High-school dropouts cost Maryland about $193 million each year in lost tax revenue, according to a study released Tuesday.

As the nation's dropout rate decreases, Maryland's has been increasing, and last year, about 27,000 high-school seniors in the state failed to graduate.

Taxpayers pay $42 million for each year's class of dropouts because of reduced tax revenue, and increased Medicaid and incarceration costs, according to the study from the Maryland Public Policy Institute and Indianapolis-based Friedman Foundation for Educational Choice.

"Obviously, as you can see, this is a serious problem that needs to be addressed," said Christopher B. Summers, president of the institute. "There's a fatal flaw somewhere in the system."

The report points out the disparity between graduation rates in Baltimore City and the surrounding suburban areas. About 35 percent of city students graduate, the third-worst rate in the country, compared with nearly 82 percent in the nearby counties.

msilvestri@baltimoreexaminer.com