A recent report by the National Governors Association cited plunging tax collections and soaring medical costs as major factors that have led to the worst fiscal problems for states since WWII. In 2002, 46 states faced a collective budget shortfall of $49.1 billion. According to a recent article in the Washington Post, the nation’s governors are placing much of the blame on the federal government and its new mandates, on last year’s $1.35 trillion federal tax cut. Meanwhile, the White House says that it must deal with the same poor economy and rising health care costs that state governments are experiencing. In addition, a report from the Center on Budget and Policy Priorities noted that 43 states enacted major tax cuts from 1994 to 2001, costing the states $40 billion in lost revenue annually.
The federal government, however, is not entirely blameless. Both last year’s tax cut and this year’s stimulus bill included tax cuts and breaks that directly decreased state revenues. In addition, the recently passed No Child Left Behind Act, “envisioned spending nearly $28 billion on new educational testing and teacher training,” according to the article, “but the Bush budget requested $22 billion, and so far, Congress has approved nothing.” Just last Monday, a group of governors met with Secretary Paige to demand adequate funds to cover the law’s new mandates.