Democrats Offer the States a Ray of Hope

I do not envy you. In the next few months, excruciating decisions must be made in virtually every state capital. As NGA's fiscal survey of states reported in November: "nearly every state is in fiscal crisis."

When the updated budget shortfalls for fiscal 2003 ($20 billion to $30 billion) are added to the projected shortfalls for fiscal 2004, our states must address a collective shortfall of $100 billion by the end of the summer.

Today, I want to deliver three messages from the House Democratic Leadership.

First, we are committed to helping the states weather this budget storm. Jump-starting our stagnant economy – which has had a devastating impact on your bottom lines – is our number one priority.

Second, we believe that elements of the president's tax plan, if enacted, will severely restrict funding for vital priorities such as homeland security, education and health care.

And third, we are deeply concerned about administration proposals to shift responsibilities to the states – on medicaid, on head start, on housing subsidies – as well as the federal government's ability to fund such programs in light of the squeeze on discretionary spending.

In January, House Democrats unveiled an economic stimulus plan that is fast-acting, fair and fiscally responsible. It would create an estimated one million jobs and cost $136 billion in 2003.

Our plan also would provide relief to the states, including:

  • $10 billion for medicaid cost-sharing, a one-year, one-time increase in the federal share of medicaid payments as provided in the Dingell-Brown bill, H.R. 3414;
  • $10 billion in federal grants to help the states with their urgent, unmet homeland security needs;
  • an additional $5 billion for highway funding; and
  • $6 billion for other critical state needs.

In sharp contrast, the president's tax plan ignores the state fiscal crises altogether. And, to make matters worse, it would dig an even deeper hole for the states.

The Administration's plan to eliminate the dividend tax would erase the tax advantage of tax-free state and local bonds. Without that tax advantage, governments will be forced to raise interest rates to attract buyers, thereby boosting the cost of government borrowing.

Furthermore, accelerating and making the rest of the 2001 tax cuts permanent removes all flexibility in dealing with the undetermined costs of the war on terrorism.

But perhaps worst of all, the president's plan, in my view, is fiscally irresponsible.

Its costs are passed onto the next generation and other levels of government, it drives us deeper into debt, and it ensures deficits for the next decade – at least.

Where some see a purposeful squeeze on discretionary spending designed to reduce the size of government, I see a fiscal straightjacket that leaves the richest nation on the face of the earth unable to meet crucial needs.

In fact, we have already witnessed the effects of a tight budget during the debate on the omnibus appropriations bill.

For one year, the president's $3.5 billion package for "first responders" – state and local police, firefighters and emergency medical teams – languished.

When that funding was finally approved, it was largely drawn from existing law enforcement and public safety programs, many of which are being cut or eliminated as a result.

House Democrats believe it's simply unacceptable to skimp on homeland security funding when we're considering enormous tax cuts that will overwhelmingly benefit the most affluent.

House Democrats believe we must consider new, creative methods of ensuring our security, such as enhancing port and border security.

Additionally, we are committed to fully funding the No Child Left Behind Act, as well as increasing child care funding and maintaining state flexibility in the reauthorization of welfare reform. Currently, we are doing neither.

Let me say that I am very pleased that the president and the Congressional leadership from both parties supported $1.5 billion in election reform funding for fiscal 2003.

As you know, I worked very closely with state and local officials on the Help America Act and know that this funding is essential to upgrading and improving our election system.

But, again, that funding is only a down payment on election reform.

The Help America Vote act authorized $3.8 billion over four years, and I urge you join me in working to ensure full funding for this landmark law.

Finally, in the next two to three weeks, Congress will consider the fiscal 2004 budget resolution.

You, the chief executives of the states, have a tremendous opportunity to make your influence felt.

I urge all of you to seize this opportunity and to prevail upon your state delegations the importance of these funding priorities.

Many of you will recall that we worked together, in bipartisan fashion, in the ‘90s to impress upon the federal government the dangers of unfunded mandates and the impact of shifting responsibility. You must continue to make that bipartisan appeal.

There is still a real possibility of getting some significant fiscal relief for states in the budget this year. Congressional Democrats stand ready to assist in that effort.

But it is incumbent on you to reach out and talk to members on both sides of the aisle to let them know the real impact of federal decisions on your bottom line.

Thank you.

###