And from everything we’ve heard here today, as well as everything you’ve already read, you know that the budget situation in most states is serious, and in many states, it’s a crisis.
So I appreciate the hard work of AFSCME and the other organizations participating today that understand the urgency of dealing with the state fiscal crisis.
I particularly appreciate AFSCME’s bringing together this briefing at a time when despite daily news of more cuts in education, public safety and health care, the federal government still seems uninterested in the fiscal outlook in the states.
In fact, the Administration has been remarkably nonchalant about deficits across the board. We just learned that the federal government will run a deficit of at least $200 billion this year and that the government will not return to surpluses for many years.
But the Bush Administration told the public not to “hyperventilate” about the sudden rise in deficits.
Unfortunately our colleagues at the state level do not have the luxury of maintaining such a false calm during fiscal crises. Any deficit in state budgets requires lawmakers to put a price on every public service states provide – from fire departments and police to job training, education, and health care – and decide what stays and what goes.
With more than 40 states facing budget deficits, governors and legislatures have to make painful decisions right away that will immediately impact their residents.
The worst state fiscal crisis since World War II did not just suddenly happen. For a few years now, economic pressures have been tearing away at the growth of the 1990s and setting the stage for the current crisis.
The biggest reason for the budget crisis is the recession that began in March 2001. State revenue plummeted last year while demand for services climbed. Another reason for the economic shortfall is tax cuts initiated by the states, totaling $35 billion between 1995 and 2001.
And then the federal government cut taxes by more than $1.3 trillion over ten years, which only compounded the problem at the state level. The states whose tax laws remain linked to the federal government can expect to lose $15 billion in estate tax revenue alone, and that doesn’t count state revenue lost to other tax cuts such as business depreciation.
These three main reasons for the budget crisis are in the past, and now we have to find the solutions that will drive the economy out of this recession. Our solutions cannot repeat past mistakes and must create long-term balance for the states.
Already, the economic plan put forward by President Bush fails on both notes.
His plan worsens the states’ fiscal situation. His proposal to restructure the tax code’s treatment of dividends and certain capital gains once again means that states that link their tax laws to the federal government’s stand to lose billions more in tax-collection revenue. And his proposal could worsen states’ fiscal situation by making revenue-raising municipal bonds less attractive to investors. And his plan does nothing to restore long-term balance to the states.
New federal mandates on homeland security and education require expensive reforms, but President Bush did not include any additional aid to the states in his plan.
For a total of $670 billion, the President’s plan is a wasted opportunity to address the most serious problems in our economy.
The Bush plan will not create jobs. It will not boost the economy. It ignores the crisis in the states. It exploits the urgency of the economic crisis as cover to restructure the tax code and push an agenda that helps the wealthiest Americans.
The union movement is concerned about the fiscal health of our states because they put into motion the most important public services. We believe hat Congress should pass and the President should sign an economic recovery plan that makes the states a priority and specifically addresses increased responsibility for homeland security and federal education reforms.
The federal government should make it a priority to help states cover exploding Medicaid costs, and to expand programs that provide health insurance to low income children. The federal government should make it a priority to help states trying to build up public health and emergency safety programs, as well as to meet the training and hiring needs of front line police officers, fire fighters, and emergency personnel.
The federal government should make it a priority to increase payments to states for programs that aid the elderly and children, to fill in the gaps on cuts that may have already been made. And the federal government should make it a priority to help states meet new guidelines on education – to hire new teachers, build new schools, and guarantee a solid education to all our students.
And finally, the federal government and the Bush Administration must realize that the states are the economic engines of our nation and when they are stalled, no amount of misdirected tax cuts will create new jobs.
This nation has lost more than two million jobs in the last two years. Ten million unemployed Americans are looking for jobs they cannot find. Only one job is created for every two or three applicants. That kind of imbalance in the job market suffocates our economy and shuts down growth.
We need an economic recovery plan that puts money in the hands of people who need it and will spend it. And we absolutely must make sure money gets to the states so they can rebuild toward long-term balance.
