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States Are Turning To Washington For Fiscal Help
Daily Policy Digest

State & Local Issues / State and Local Spending

Wednesday, December 18, 2002
By and large, states didn't take advantage of sharply escalating revenues in the 1990s to prepare for today's severe revenue drought. They spent the surpluses and are now demanding help from the federal government, even though Washington has budget concerns of its own.

 "The federal government didn't create this problem but they've made it worse," charges Ray Scheppach, executive director of the National Governors Association.
  • The states argue that they are increasingly stuck with Washington's unfunded mandates -- on health, education, homeland security and election reform.
  • President Bush's 10-year tax-cut plan further reduced state revenues, they contend, since many state's tax laws are linked to the federal tax code.
  • The National Association of State Legislatures estimates that states are collectively short some $17.5 billion in fiscal 2003 -- with a shortage of as much as $50 billion looming for 2004.
  • Governors want the feds to fill a good part of that gap with a one-time subsidy of perhaps $12 billion to cover states' cost of Medicaid -- which is the fastest growing item in state budgets.
Among the list of unfunded mandates the states blame on Congress and the Republican administration are the "No Child Left Behind" education act that requires testing and higher standards for public schools, the new election-reform law, Medicaid and welfare requirements, and homeland security.

 Source: Jackie Calmes, "States Confront Fiscal Crisis," Wall Street Journal, December 18, 2002.

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