Aid to States: Sounds Good
"Aid to states," despite its assonance, is not a sexy issue. With the economy in the tank and millions of low- and middle-income Americans struggling, the first remedy to come to mind is usually not fiscal relief to the 50 statehouses across the country.
Extending unemployment benefits, increasing food stamp assistance, or sending tax rebates all jump out first (think of the imagery: the unemployed worker, the hungry child, the check in the mail). And those are useful policy tools, don't get me wrong. But there's one missing: aid to states.
In today's paper of record:
Squeezed by high inflation, dwindling tax revenues and a national economic downturn, states from coast to coast have struggled to close yawning budget gaps while bracing for another difficult fiscal year, which in most states begins Tuesday.
State tax revenues, adjusted for inflation and tax cuts, fell 5.3 percent in the first quarter of 2008 compared with the same time a year ago, according to a report to be released Tuesday; it was the third quarter in a row that total adjusted revenue declined. The first quarter revenues were the weakest among states since early 2003.
Sales tax revenues, the beating heart of many budgets, were essentially flat for the first time in six years. Corporate income taxes declined 5.1 percent from January to March compared with the same period the previous year -- the third straight quarterly decline. And 12 states showed a falling off in personal income taxes, though revenue from those taxes rose 4.4 percent nationwide.
The Center on Budget and Policy Priorities (CBPP) noted recently that 29 states plus the District of Columbia face total budget shortfalls of at least $48 billion in the coming year--threatening serious economic consequences.
Unlike the federal government, most states are required (by law or constitution) to pass a balanced budget. This means that state governments must either raise taxes or cut spending to fill the hole. Guess which one is more politically palatable. So unless the federal government steps in, vital services like public health programs, K-12 education, and programs for the elderly and disabled will be slashed. The CBPP has a detailed examination of the ills facing the most vulnerable members of our society if states do not receive fiscal relief from the federal government. Congressional leaders are now calling for a second economic stimulus, which may include such relief.
"Aid to states:" it rolls off your tongue--and should certainly come to mind.