"We're reaching the end of the period where we can continue to absorb these reduced revenues without having significant impact on services, especially education," said Kentucky Gov. Paul Patton, a Democrat and vice chairman of the National Governors Association.
Patton and Michigan Gov. John Engler, the Republican chairman of the governors' group, talked Tuesday about the impact of diminishing state revenues, spelled out in a new survey of state income taxes. The survey shows income taxes dropped by 15 percent in the first four months of this year.
"It's a double whammy -- not only did you not have the money you thought you had for last fiscal year, but you now have to revise dramatically downward your revenues for the coming year," said Ray Scheppach, the NGA's executive director.
Almost all states have rejected general tax increases, opting for a mix of spending cuts and targeted tax hikes such as higher cigarette taxes or corporate taxes. The governors said that despite the economic recovery apparently now under way, states face lag times of up to 18 months before their revenues recover.
Engler and Patton are asking members of Congress to help the states meet their growing financial crises. The governors are asking federal lawmakers to:
- Support Senate legislation that would provide an additional $4.5 billion in Medicaid money over the next 18 months and a block grant of $4.4 billion that states could use for health-care or social-service needs. The measure was introduced recently by Sens. Ben Nelson, D-Neb., and Susan Collins, R-Maine, who have been collecting additional Senate sponsors.
- Back states' efforts to come up with a uniform way to collect sales taxes on products sold out of state, especially over the Internet. Governors in many states are working together to come up with a simplified national tax collection strategy for goods sold to state residents by out-of-state businesses. Governors want federal help requiring businesses to collect and remit taxes for participating states.
- Provide "a good, big transportation bill" next year to help states with transportation projects. Engler said states have had to take increasingly more of that burden in recent years.
The governors' said their chances of getting help are increasing as members of Congress grow aware of the potential that states will have to start cutting programs like education.
"We want to emphasize to them that this is not unique to Michigan or Kentucky," Engler said. The move to help the states on Medicaid and health care funds could gain a lot of support in the Senate, which "has a lot of former governors."
"In the House, you have a significant number who have never served during a recession," Engler said. "They haven't seen a budget that is contracting. They have a hard time believing it's actually happening."
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