March 5 , 2003
President Bush did not provide much hope for the cash
strapped governors in his presentation to them last week.
He mentioned the federal deficit and called on others to put their
houses in order.
Certainly, some states were too aggressive at cutting
taxes in the past decade as their revenues were bloated by capital gains
payments. California also set up
an energy marketing program that dramatically exhausted state resources.
Other states used the temporary surge in tax collections to finance
programs with long term obligations.
However, the governors can also show that some of their
woe is the result of federal mandates. An
increase in our alert status from code yellow to code orange immediately
required more intense use of safety personnel, paid out of state and local
budgets. Those police
checking beneath the cars at Hartsfield are not
paid by the federal government.
Also, Medicaid criteria are written in Washington and
paid in the states. In Georgia
alone, mandated Medicaid payments added more than $300 million to a budget
already in deficit. Even the
President's education program requires state and local school authorities to
pay for the testing that determines whether a school is meeting minimal
As most states follow federal tax codes, any elimination
of taxable dividends at the federal level will reduce revenues at the state
More than a third of the state deficits can be directly
placed at the feet of federal authority.
The charge of unfunded mandates that state governors used a few years
ago remains the norm.
Unlike the federal government, states cannot use deficits
for general obligations. Thus,
those higher Medicaid payments must come at the expense of some other state
programs or spawn more taxes. (States
can be inventive in using their capital budgets, however, as the amount of
borrowing has increased by nearly $100 billion in the past three years).
A couple of centuries ago, some Americans decided it was
wrong for a government to quarter troops in their homes and require the house
members to feed those troops. Yet,
the federal government is now doing almost an equivalent by mandating
responsibilities that require resources without providing those resources.
I certainly do not advocate that states should run to the
federal government whenever they have budget problems.
Even if states must raise taxes to maintain programs, that is not
sufficient for federal aid. However, state tax increases are factors that should be
considered by the federal government in determining what stimulus package
should be provided to the nation.
Also, states should not immediately use the unfunded
mandate argument to hide their own inappropriate budgetary behavior.
Even if all mandates were funded, I still would oppose even a single
dime of our budget going to transportation projects or the administration of
that department from resources other than transportation use taxes such as
tolls and gasoline taxes.
However, I do believe that Congress should not pass
mandates without funding them. Whenever,
we go from a code yellow to a code orange, federal budgets should shoulder the
police and fire overtime that will be needed.
When new procedures are passed for Medicaid or the administration of
schools, federal resources should be granted to finance those procedures.
Now I do not believe that any costs associated with
administering such programs should automatically go against the federal
budget. That would lead to
inefficiency in the administration of such programs.
Instead, state grants should be provided based upon the
relevant population. Thus, the
mandate may require an additional x dollars per Medicaid patient throughout
the nation. Each state would
receive x times the number of qualified patients.
Any state that wishes to extend the federal mandates could do so with their own funding. However, by requiring that the federal government pay for their mandates, we could avoid the current process of burdens being shifted from Washington to the state houses. We might also avoid some federal legislation, if the financing burdens are placed with those who created the legislation.