January 22, 2008
States Outline Options for Congressional Economic Stimulus Package
From child support to employment benefits, federal action would help boost recovery
WASHINGTON – As U.S. stocks tumble reflecting the growing concern of a recession, the National Conference of State Legislatures asks Congress to consider states' fiscal concerns in an economic stimulus package that still is being developed. In a letter to House and Senate leadership, NCSL offers options for consideration including temporary changes in the Medicaid matching rate and increases in discretionary funds for states.
Twenty-four states reported state revenues have been hurt by the housing sector slump. At least a dozen states and Puerto Rico are seeing declines in their real estate transfer or recording taxes. Many states anticipated a slowdown in this revenue source, but the drop is even higher than expected.
"States are mandated to balance their budgets. If the economy continues to slow or takes a turn for the worse, state finances undoubtedly will decline," said William T. Pound, executive director of the National Conference of State Legislatures. "Our recommendations for the Economic Stimulus Package are similar to those that were enormously helpful to states to recover from the last economic downturn of 2001. However, this assistance came three years into an economic recession. We want to boost economic growth and prevent a downturn before it starts."
NCSL Recommendations for an Economic Stimulus Package
Discretionary Grants to the States: As each state will likely face different fiscal challenges in FY 2008 and FY 2009, discretionary grants provide states with the flexibility to address fiscal concerns through one-time state grant assistance. In addition, discretionary grants funds help eliminate shortfalls in state-federal partnerships.
State Medicaid Assistance: A freeze or increase in federal matching payments for Medicaid would assist people who lose health care coverage during the economic downturn and complement support provided in the economic stimulus package to extend and increase unemployment benefits.
Child Support Enforcement Payments: Child support payments made by noncustodial parents go directly to meet the basic needs of families and children, so they are quickly re-circulated back into the economy. Federal funding is critical to helping these payments be efficiently and consistently collected. Rescinding the Deficit Reduction Act (109-171) provision that prohibits states from using incentive payments to draw down federal funds will assist states with collections of child support payments and provide immediate assistance to working families in a recession. The child support program also is incredibly cost effective— for every dollar spent in government funds, $4.58 is collected on behalf of working families.
Food Stamps Assistance: Provide a temporary increase of Food Stamp benefits for households already eligible for and receiving such benefits.
Employment Benefits: Provide temporary extension of unemployment benefits to eligible individuals.
Sales Tax Fairness and Simplification (S. 34; H.R. 3396): Grant states the authority to require collections of sales tax on remote sales and provide equity for all retailers. Sales tax simplification would provide $6.8 billion for businesses and fiscal relief to the states at no expense to the federal government.
Federal Tax Investments: Pursue any federal personal and corporate income tax relief through tax credits, such as accelerating the scheduled increase in the child tax credit, and other changes in federal tax liability, rather than through exclusions or deductions.
Capital Projects: Increase Investment in transportation and waste water treatment
The National Conference of State Legislatures is the bipartisan organization that serves the legislators and staff 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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