This week more state governors are looking skeptically at the stimulus bill and considering rejecting some of the funding because of obligations attached to it which they fear will result in budget-busting debt once the federal money runs out.
Rick Perry of Texas, Bobby Jindal of Louisiana, Haley Barbour of Mississippi, Buth Otter of Idaho, Sarah Palin of Alaska and Mark Sanford of South Carolina who came out against unfunded mandates in the stimulus plan last week. This week they’ve been joined by Bob Riley of Alabama, Phil Bradesen of Tennessee, Mike Beebe of Arkansas, Sonny Purdue of Georgia. That’s a total of 10 governors, mostly in the south and west who have expressed concerns and are considering their options in opposing the stimulus plan.
The source of their concern is that the stimulus bill only includes enough federal funding to cover the expanded unemployment requirements for a limited period. It provides 100% compensation through May of 2010 and an expanded amount for 50-50 matching funds through September of 2010, limited to a total appropriation of $400 million. After that the expanded duration of benefits, the additional $25 per week and the rules allowing for easier qualification remain in force, but the federal funding ends. It could even end earlier if the allocated money is used up. Either way, by the fall of 2010 states which participate will be paying considerably more out of their budgets. Or more realistically they will pass the cost on to businesses in the form of higher state unemployment taxes taken out of the payroll tax, so that the burden of “stimulus” will fall most heavily on already threatened small businesses and entrepreneurs.
How much of a burden this will place on the states and on businesses is unclear. If unemployment levels continue to grow it could be devastating, but even if unemployment were to return to 2007 levels, the changes in the rules would create a larger obligation than states were funding at that time, so they’d still be on the hook for some additional money. The complaint of many state governors is that this is basically an attempt by some of the states which passed their own unemployment expansion bills in the past to transfer the cost of their programs to the other states through the use of the federal mandate.
This issue of fiscally responsible and relatively economically stable states underwriting the problems of states which overspend and have weak economies goes beyond just unemployment. Most of the states which are complaining have only small and manageable budget deficits or are even likely to have budget surpluses. They feel that they can take care of their own unemployed on their own terms without outside mandates. Some, like Texas, also regularly pay more money in federal taxes than they receive back in federal benefits, so their taxes are underwriting the fiscal problems of other states. When you live in a state which has a balanced budget and manages to keep taxes and spending relatively low, it’s pretty troubling to see other states with out of control spending getting your money from the federal government to finance their irresponsibility.
Like all elected officials, Governors have an obligation to the voters and taxpayers of their states. An important part of that is developing and passing responsible budgets. Every year additional mandates from the federal government make that job more difficult. At some point a line has to be drawn, and for many governors the stimulus bill seems to be the straw that broke the camel’s back.