Sunday, February 23, 2003

State budget deficits unite governors

Taft calls for federal aid

By Carl Weiser
Enquirer Washington Bureau

WASHINGTON - The chairman of the National Governors Association warned Saturday that state financial crises are only getting worse - and Washington needs to come to the rescue.

"Next year there's going to be draconian cuts in state services," said Kentucky Gov. Paul Patton, a Democrat. "We can get through this year. But next year we're going to hit the wall."

Almost all the nation's governors gathered in Washington for their four-day winter meeting. This year, whether Republican or Democrat, virtually all have something in common: They're broke. Thus the theme of the conference: "Governing in Challenging Times."

"Financially, this is probably the toughest times for states since World War II," said NGA vice chairman Dirk Kempthorne, Idaho's Republican governor.

Most states are entering their third year of increasingly dire deficits. And the combined $30 billion deficits for fiscal 2003 are projected to hit a combined $80 billion next year, according to the NGA.

That means that, in Kentucky for example, Patton freed 900 felons prematurely because, he said, the state couldn't afford to keep them imprisoned. In Idaho, it means Kempthorne is seeking a 1.5 cent increase in the sales tax, anathema to a Republican who prides himself on cutting taxes.

Ohio Gov. Bob Taft, a Republican, said health care - especially for the poor and elderly - was gobbling up much of state spending.

He said the federal government needs to eventually pick up the tab for poor senior citizens who are eligible for Medicare and Medicaid - about 172,000 Ohioans. Medicaid costs in Ohio now consume about 37 percent of the state budget, Taft said. A big chunk of that is prescription drug coverage for those who are "dual eligible," on Medicaid and Medicare.

"Medicaid is in the process of bankrupting state governments," Taft said. "It's not a sustainable program."

Either the state will have to drastically cut other services, like school spending, or it will have to make Medicaid services much more restrictive, he said.

The Bush administration is sending Health and Human Services Secretary Tommy Thompson, a former Wisconsin governor, to talk about Medicaid reform with the governors Monday afternoon. The governors also will visit the White House Monday to meet with President Bush.

Whether the NGA meeting will yield any results is debatable. The NGA works by consensus, which means that all 50 governors, liberal and conservative, must agree on positions.

Even at the opening press conference, the divisions between Republicans and Democrats were clear.

New Hawaii Gov. Linda Lingle, a Republican, said governors bear part of the blame for their fiscal crises because they failed to stash money away when times were good in the 1990s.

But Patton said Lingle was wrong, and that states had beefed up rainy day funds. The problem, as Maine's Democratic Gov. John Baldacci explained, was that that rainy day had become "a rainy week and now a rainy month."

Most governors said they expected better times to return within a few years.

"We hope we can get the economy started again," said Indiana Gov. Frank O'Bannon, a Democrat.

Patton said the federal government, unlike the states, was not restrained by a requirement to balance its budget. So in bad times, it could go deep into deficit to help out states.

"That is our case for fiscal relief," he said.

But Kempthorne, like Taft, said beyond a general agreement to ask Washington to pick up more of the costs for the elderly poor, states needed to solve their own problems. Most states have demanded budget cuts from their departments and moved to hike cigarette taxes or add new sources of revenues, like slot machines.

Taft has failed to convince his fellow Republicans in the Legislature to raise taxes on cigarettes and remains adamantly opposed to new forms of gambling. He says he will order more spending cuts by March 1.

The kind of aid the states will seek from Washington, or whether they will even agree to seek federal aid, wasn't clear. And that could mean that by the end of the meeting, beyond some vague resolution, there may not be any unified voice for the governors.

"When this organization can not reach consensus," said Patton, "we just don't act."


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