Economic Recovery Requires State and
Federal Cooperation, State Legislatures Say
WASHINGTON, D.C. -- National economic stimulus plans can only work if states are given the necessary economic tools as partners with the federal government, the president of the National Conference of State Legislatures will tell Congress on Tuesday.
 Congress must adopt state-friendly economic recovery plans and provide short-term, temporary fiscal relief to states in order to meet escalating fiscal shortfalls, says NCSL President Angela Monson, an Oklahoma state senator. She will tell the members of the U.S. Senate Finance Committee that current and projected state deficits will cause states to adopt fiscal policies that work against economic recovery. Also, she says, federal mandates force states to fill funding gaps left behind by the federal government.
"As federal lawmakers attempt to spur economic growth, state legislatures find themselves in the tragic position of working against federal efforts, eliminating jobs, cutting health and welfare programs just when our constituents need them most" Monson says. "While the federal government extends unemployment benefits, we will be cutting job training, health insurance and child care funding. While the federal government cuts taxes, states may have to raise taxes and fees. The economy will be caught in the middle of a tug of war that states do not want, but do not have the resources to avoid."
Monson says it is absolutely crucial that Fiscal Year 2004 federal budget resolutions include funding assurances for state and local government relief. This will help assure that the federal and state governments are working together to stimulate the nation's economy, create jobs and create economic opportunities.
Her testimony comes one week after NCSL released a national fiscal survey that showed state budget deficits have grown 50 percent in the last two months. NCSL's survey revealed states must collectively close a $26 billion gap in the current fiscal year and -- with only two-thirds of the states able to supply data -- a minimum $68 billion gap for the next fiscal year. Twenty-nine states have imposed across-the-board budget cuts with no area of state spending spared, including elementary and secondary education, Medicaid, corrections and funds to local governments.
Part of the problem, she says, is that states are still paying for programs mandated by the federal government that have never been fully funded.
"We have entered into a new era of unfunded mandates and underfunded national expectations," Monson says. She points out that states only have 11 months to meet the first deadlines for implementing many required reforms of the Help America Vote Act. To date, states have not received any federal funds to meet those requirements.
Education also is suffering due to federal unfunded mandates. States are waiting for federal funding needed to meet requirements of the No Child Left Behind Act, which is $5 billion below authorized amounts and more is needed, according to most state estimates. In addition, states are paying for federal requirements to provide special education programs mandated by the Individuals With Disabilities Act that exceeds $25 billion per year -- nearly equal to the entire aggregate state budget gap for fiscal year 2003.
In addition, states have spent billions on homeland security improvements, based on expectations of federal assistance that has not yet been approved. Requirements to assess community waters systems and inoculating first responders are just two examples where mandates have come without funding.
Monson told the committee that NCSL supports a range of tax proposals, including accelerating the increase in the child tax credit, a payroll tax holiday, and the use of tax rebates. She also told the committee that NCSL urges Congress to not change definitions of adjusted gross or taxable income since that could result in negative consequences for states. Instead, NCSL urges the use of tax credits of other means of changing federal tax liability.
Monson says state legislatures are key partners in improving the national economy, and stand ready to work with the federal government.
"America's state legislatures support a federal economic stimulus package to spur consumer spending and capital investment and to encourage job growth, she says. "Only a long-term, sustained economic recovery will ease the fiscal pressures facing the states."
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