Federal Budgets and Revenue Update

August 18, 2004
Volume 10, Number 3

An Information Service of the NCSL Budgets and Revenue Committee

OMB Revises Budget Deficit Figures

The White House Office of Management and Budget (OMB) released its Mid-Session Review on July 30th containing updated budget projections for fiscal years 2004-2009. The report revises the deficit from February’s estimate of $521 billion (4.5 percent of gross domestic product (GDP)) to $445 billion (3.8 percent of GDP). The report outlines the President’s progress towards cutting in half the annual deficit by 2009. The report has been criticized by Democrats because the estimates for 2005 do not include the anticipated costs for operations in Iraq and Afghanistan beyond the president’s $25 billion request and are only seen as a strong improvement because of what could be seen as inflated February deficit projections.

Mandate Monitor Warns of Excise Tax on Vaccines and Reprogramming of FY 2004 Funds

The latest edition of NCSL’s Mandate Monitor identifies two more major federal cost shifts to state governments. The first involves a decision by the Joint Tax Committee not to score excise taxes on vaccines as an intergovernmental mandate. A provision in H.R. 4520 imposes an excise tax on vaccines for hepatitis A and influenza. The Congressional Budget Office (CBO) estimates this provision will increase state Medicaid spending by $140 million over five years. Although it is not a new activity, two federal agencies are considering “reprogramming” funds that states are anticipating receiving. $55 million of FY 2004 bioterrorism funds and $10 million of FY 2005 Help America Vote Act funds, with congressional approval, could end up being used for purposes other than originally intended. CBO does not currently score “reprogramming” activities as “unfunded mandates.”

Days after the release of NCSL’s latest Monitor, the Congressional Budget Office issued a cost estimate on H.R. 4520 identifying several other potential unfunded mandates and cost shifts directed toward state and local governments. The most notable unfunded mandates and cost shifts would prohibit states from using offshore contracts, require payment of overtime to certain workers, and expand optional coverage for sickle cell disease under Medicaid. The total cost for prohibiting states from using offshore contracts and expanding optional cover for sickle cell disease would be $51 million for FY2005-2009.

New Reports Suggest Uncollected E-Commerce Sales and Use Taxes Hurting State Revenues

In FY 2003, state and local governments were unable to collect nearly $16 billion in sales and use taxes on remote sales. These losses will rise to between $18 billion and $34 billion in the next five years as estimated in a new report from the University of Tennessee’s Center for Business and Economic Research. The NCSL and National Governors Association commissioned report reinforces the need for states to simplify and make uniform their sales and use tax collection systems. It also fortifies NCSL’s ongoing efforts for Congress to enact legislation authorizing collection of these taxes from remote sellers for those states that enact simplification legislation.

For more information contact NCSL staff: Molly Stauffer, Nick Steidel, Melanie Ross.