Capitol to Capitol
An Information Service of NCSL's Standing Committees

Volume 18   Issue 15 - April 29, 2011

 

DEFICIT PANEL GROWS BY TWO

 Senate Majority Leader Mitch McConnell of Kentucky and Speaker John Boehner of Ohio have appointed the Republicans to the working group that will negotiate a comprehensive deficit reduction strategy headed by Vice President Joe Biden. Senator Jon Kyl of Arizona and House Majority Leader Eric Cantor of Virginia will join Senate Appropriations Chairman Daniel Inouye of Hawaii, Senate Finance Committee Chairman Max Baucus of Montana, Assistant Democratic Leader Representative Jim Clyburn of South Carolina and Ranking Member of the House Budget Committee Representative Chris Van Hollen of Maryland at the group’s first meeting on May 5. Although details about the panel’s work remain unclear, President Obama said he hopes it can reach “a final agreement on a plan to reduce the deficit and get it done by the end of June.” (NCSL Staff contacts: Michael Bird, Jeff Hurley)


HOUSE SPENDING BILLS ON TAP

With the U.S. House of Representatives passing a budget resolution on April 15, House Appropriations subcommittees are expected to mark up spending bills in early May when Congress reconvenes from recess. Although the appropriations process typically doesn’t begin until both the House and Senate adopt a budget resolution to set enforceable spending caps, wide disagreements in federal spending priorities make this highly unlikely this year. Therefore, the House plans to adopt a “deeming resolution,” which would enforce a spending cap on discretionary spending for fiscal year 2012. Stay tuned. (NCSL staff contacts: Michael Bird, Jeff Hurley)


FISCAL OUTLOOK “CHALLENGING” FOR STATE AND LOCAL GOVERNMENTS

State and local governments, despite recent revenue spikes, “…face long-term fiscal challenges that grow over time” concludes an April 2011 annual assessment from the Government Accountability Office (GAO). Not surprisingly, GAO finds “the primary driver of long-term fiscal challenges” to be the projected growth in Medicaid and “the cost of health insurance for state and local retirees and employees.” Also cited as short- and long-term fiscal challenges are state and local government pension obligations, federal Medicaid assistance and implementation of federal health care reform. The full report, GAO-11-495SP, is available at http://www.gao.gov/new.items/d11495sp.pdf. (NCSL staff contacts: Michael Bird, Jeff Hurley)


GOING NEGATIVE

As the conversation over raising the nation’s debt limit intensifies, on April 18, Standard & Poor’s downgraded their long-term U.S. credit rating from “stable” to “negative.” While affirming the highest given “AAA” credit rating, Standard & Poor’s changed their outlook since “very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us.” Treasury Secretary Timothy Geithner has stated that the U.S. debt ceiling will be reached by May 16. If congressional action is not taken by then, he said the Treasury will take “extraordinary” measures to delay government default. (NCSL staff contacts: Michael Bird, Jeff Hurley)


BANKRUPTCY, DEFAULTS, DEBT AND PENSIONS UPDATE

This quartet of state and local government issues which have been combined by some voices in the nation's capital continues to draw the attention of Congress and the media. The fervor for state bankruptcy protection created by individuals who are not state elected officials has waned significantly. Last week, a pair of Federal Reserve economists joined a growing list of those dubious that 2011 will witness billions of dollars in municipal bond defaults. Gerald Dwyer, a Federal Reserve economist from Atlanta, stated in a March 2011 report that the data on state and local governments do not support a "forecast of widespread defaults and losses on municipal bonds." A February 2011, report from Roubini Global Economics concludes that "state and local debt problems are not systemic in nature, and will not infect the financial system, though they will dampen economic recovery." Earlier this year, NCSL with other state and local groups, put together a fact sheet on pensions, municipal bonds and bankruptcy to shed light on state involvement, which is available here: http://www.ncsl.org/documents/statefed/statelocalfactsheet.pdf  (NCSL staff contacts: Susan Parnas Frederick (bankruptcy), Diana Hinton, Michael Reed (pensions), Michael Bird, Jeff Hurley (defaults))