Governors Want More Federal Support for States

The nation's governors meet with President-elect Obama in Philly tomorrow to talk about their growing fiscal woes. Here's the press release from the guvs on what they want from Washington:


WASHINGTON—Leaders of the National Governors Association (NGA) and the National Conference of State Legislatures (NCSL) joined together today to call on congressional leaders and the Administration to take early action to stabilize the nation’s economy.

Twenty states already have cut $7.6 billion from their fiscal year (FY) 2009 budgets, and 30 states have identified additional shortfalls totaling more than $30 billion. Twenty-five states also have identified shortfalls of $60 billion for FY 2010. However, these numbers tell only a portion of the story, with previous budget actions and the continuing downturn producing cumulative budget gaps of more than $140 billion for FY 2009 and FY 2010. Additionally, states feel the greatest impact on their budgets in the year after a recession ends, primarily because Medicaid growth occurs late in the recession and employment growth lags the recovery. Thus, the repercussions of this downturn will last for several years—and will be much worse without swift action.

One of the most effective sets of mechanisms the federal government can use to speed recovery is investments in existing federal-state programs because these programs are on-going and therefore the funds can be obligated quickly and expedited efficiently.

Programs with the greatest potential to hasten the recovery include:

· Countercyclical programs where federal government funding can help prevent proposed budget cuts that states would be forced to make because of their balanced budget requirements;

· Infrastructure investments that create jobs; and

· Safety net programs that assist people in the greatest need (unemployment insurance, Medicaid).

Specifically, governors and state legislators are asking that an economic recovery strategy include a temporary enhancement of the Federal Medical Assistance Percentage (FMAP) for at least two years, which is a major anticyclical program. In addition, they are asking for increased investments in infrastructure and increased support for unemployment benefits and the food stamp program.

“These immediate solutions will drive economic recovery. Investments in ready-to-go infrastructure projects are a cost-effective creator of high-paying jobs,” said NGA Chair Pennsylvania Gov. Ed Rendell. “These investments should include a broad array of infrastructure projects including airports, bridges, highways, transit systems, ports, rails, clean water, sewers and broadband. We should target high-priority projects so funds can be obligated and invested so that we will see the effects quickly.”

“States face a challenge trying to balance their budgets and fund essential services and programs at the same time,” said NCSL President Joe Hackney. “The latest national developments and stock market declines make the state fiscal situation even more precarious. An economic recovery package will go a long way in providing immediate need for capital projects and spur much-needed job growth.”

“The slowing economy is resulting in growing unemployment, increased demand for state services and significant declines in state revenues,” said NGA Vice Chair Vermont Gov. Jim Douglas. “As governors work to reduce budget shortfalls and plan for the coming fiscal year, we need to be partners in an economic recovery strategy that includes additional funding for Medicaid and investments in infrastructure.”

In recent written testimony submitted to the U.S. Budget Committee, Mark Zandi, chief economist and co-founder of Moody’s, commented that temporary increases in government spending have an immediate effect on the economy. He wrote: “The most efficacious spending includes extending unemployment benefits, expanding the food stamp program and increasing aid to hard-pressed state and local governments. Increasing infrastructure spending would also greatly boost the economy, particularly in the current downturn.”

Leading economists agree that there is a need for quick action and that states are a part of the solution. According to a recent letter to congressional leaders from more than 380 national and international economists, “the latest data clearly show that the economy is entering a serious recession” and that aid to state and local governments and moving infrastructure projects forward should be on the list of targeted solutions.