February 9, 2005
(updated February 15, 2005)
FY '06 BUDGET ANALYSIS: Export of the Federal Deficit Begins
WASHINGTON, D.C. - Federal spending for many state programs would decrease dramatically beginning in October if Congress approves the administration's budget request, according to the National Conference of State Legislatures' budget analysis.
NCSL and state lawmakers identified several trends within the proposed budget that are cause for concern.
Deficit Reduction
The proposed budget aims to reduce the federal deficit by half by 2009. State legislators, who are required to balance their budgets each year, enthusiastically support the concept of deficit reduction. However, the president's budget proposal achieves that deficit reduction through disproportionate spending reductions.
To effectively reach the goal of reducing the deficit, state legislators believe that all aspects of the spending and revenue side of the federal budget must be on the table. State lawmakers are eager to work with their federal counterparts to bring the federal deficit under control. The budget as proposed would merely export the federal deficit to the states.
Unfunded Mandates
The administration's budget proposal would further exaserbate the level of unfunded mandates and cost shifts to state and local government. Last year, NCSL identified at least $29 billion worth of cost shifts that require state expenditures for federally mandated programs. Many of those cost shifts continue to be underfunded in the recent budget proposal.
- The Indviduals with Disabilities Education Act (IDEA) continues to be funded at only a fraction of what it costs states to implement the programs. The proposed budget would fund IDEA at 19 percent of the per pupil costs despite a long-standing promise from Washington that the federal government would cover 40 percent of the per pupil costs of the program.
- Proposed funding for the administration's cornerstone education policy, No Child Left Behind Act, fails to be adequately funded. Funding for NCLB would increase by less than $1 billion under the proposed budget, which equals an increase of less than 0.2 percent of the K-12 budget in the United States.
- The Help America Vote Act (HAVA) enacted by Congress and signed by the president in response to the voting irregularities associated with the 2000 presidential election is not funded under the current budget proposal which leaves a funding gap between the amount Congress has authorized and the amount states have actually received for implementation.
- Funding for the State Criminal Alien Assistance Program (SCAAP) would be eliminated if the budget proposal were enacted. SCAAP provides states with fiscal resources for the incarceration of undocumented immigrants who are convicted of state crimes. The program had been underfunded at levels approaching $300 million in previous years.
- Congress recently enacted reforms in response to the 9/11 Commission report that would require states to make uniform changes to state-issued drivers' licenses based on recommendations of a federal rulemaking committee. The budget proposal fails to include any funding for the implementation of such changes.
State lawmakers strongly believe that the federal government has a constitutional responsibility to honor its financial obligations or eliminate the mandates they cannot or refuse to fully fund.
Medicaid
Since its inception, the Medicaid program has been a state-federal partnership that intends to provide health coverage for the nation's poorest individuals. However, through deep cuts proposed this week of up to $60 billion over the next 10 years, budget negotiators may erode that partnership and pass additional costs on to the states and increase the number of uninsured.
The budget proposal displays a full commitment to serving mandatory categories of those eligible to receive benefits, but lacks a commensurate federal commitment to optional categories of recipients. The proposals aimed at states' ability to raise the matching funds ensure even greater fiscal pressure on state budgets. This level of commitment runs contrary to the partnership entered into between the states and the federal government to provide quality healthcare to needy families and individuals.
The National Conference of State Legislatures has endorsed federal legislation that would create a joint state-federal commission to examine programmatic and funding aspects of Medicaid, an important first step to a strong reform initiative.
Entitlement and Mandatory Programs
"NCSL will not support any reduction in the federal commitment to existing entitlement and mandatory programs that imposes new unfunded mandates or results in cost shifts to states," wrote Maryland Delegate and NCSL President John Hurson and Illinois Senator and NCSL President-Elect Steve Rauschenberger in a letter to U.S. House and Senate Budget Committee members.
For example, the fiscal year 2006 budget would cut the Food Stamps Program by $57 million if a legislative initiative included in the budget proposal is enacted. The bill would limit the eligibility of food stamp recipients to those who participate in the Temporary Assistance for Needy Families and Supplemental Security Income programs.
"NCSL will work with Congress and the administration to reform or modify these entitlement and mandatory programs in reauthorizations or other efforts, but not at the expense of potentially strangling services or at the risk of shifting costs to states," said the NCSL leaders.
NCSL is the bipartisan organization that serves the legislators and staffs of the states, commonwealths and territories. It provides research, technical assistance and opportunities for policymakers to exchange ideas on the most pressing state issues and is an effective and respected advocate for the interests of the states in the American federal system.
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