Thanks mainly to the economic downturn that has cost 1.7 million jobs since President George W. Bush took office and the Bush administration’s economic policies, states are facing their worst fiscal crisis since World War II, a group of union leaders, state and municipal officials, education experts and representatives of private industry said at an AFSCME-sponsored forum.
“Since fiscal year 2002, states have faced budget gaps of $189 billion. There is a lot at stake: educating our children, maintaining our cities’ infrastructure, providing decent affordable health care, housing and other public services, as well as combating high unemployment,” said AFSCME President Gerald McEntee.
The budget shortfalls have forced states to take drastic measures. For example, Oklahoma cut back on health care for children, Oregon laid off state police officers and Nevada was forced to delay the purchase of algebra books for school children.
Also, according to the Center on Budget and Policy Priorities, “some 1 million people have lost or [will] lose state-subsidized medical care under enacted or proposed budget cuts in 11 states. Tuition at dozens of state colleges and universities is rising rapidly. Child care subsidies for working parents have been scaled back in a number of states.”
An AFL-CIO report on the crisis says the huge budget shortfalls are the result of several factors, including:
- Loss of tax revenue due to mushrooming unemployment;
- Growth in demand for public services, especially health care;
- The Bush administration’s federal tax changes and cuts in estate taxes and bonus depreciation rules because many states link their tax laws to federal laws; and
- Substantial new costs for homeland security and education required by federal legislation that did not increase resources to meet these new obligations.
As states struggle to raise revenue, cut services and balance their budgets, “we have to find the solutions that will drive this economy out of recession. Our solutions cannot repeat past mistakes and must create a long-term balance for the states. Already the economic plan put forward by President Bush fails on both accounts,” said AFL-CIO President John Sweeney.
Bush’s tax restructuring plan includes no additional help for states to meet their growing obligations or to solve their spiraling debts and is unlikely to create new jobs. The National Conference of State Legislatures said the centerpiece of Bush’s plan, the elimination of the dividend tax, would costs states whose tax laws are linked to federal tax laws at least $4.5 billion. In addition, the group predicts the elimination of the dividend tax, which makes stocks more attractive, would severely crimp the sale of tax-free municipal bonds that local governments sell to finance their infrastructure.
Forum participants called on the Bush administration and Congress to develop an economic recovery program that addresses states’ needs.
McEntee said such a program should include direct fiscal aid for states and local governments. It also should provide federal investment for such critical infrastructure needs as school construction and highway repair that would create jobs and spur the economy. In addition, adequate federal funding is needed for federal programs run by states, such as Medicare, education and homeland security.
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