February 16th, 2010, Fairfax, VA—Americans for Limited Government (ALG) President Bill Wilson today urged the U.S. Senate to reject a $154 billion measure that passed the house, which includes some $71.3 billion in grants to state governments, saying, “it is not the responsibility of taxpayers in solvent states to bail out bankrupt states like California and New York.”
“The House so-called ‘jobs’ bill is really a bailout for insolvent states and, specifically, kickbacks to the public sector unions. The Senate should have nothing to do with it,” Wilson said.
The $154 billion House “stimulus” contains $48.3 billion for infrastructure and transportation spending, and some $23 billion for an “education jobs fund” that Wilson called “bailouts for state and local construction and public teachers unions, totaling more than $71 billion for states that refuse to make necessary cuts to spending.”
The $787 billion “stimulus” bill also contained $53.6 billion to bail out state and local governments. Wilson said “despite all of the deficit-spending, unemployment remains close to 10 percent, and underemployment near 17 percent.”
Currently, the Senate is considering a $15 billion bill that does not include the state bailout funds. Wilson urged the Senate to keep the states bailout “off the table.”
Some states are already clamoring for more federal funds, as reported by CNNMoney.com: “States are looking to the federal government for more help balancing their budgets, but the Senate is not heeding their call… Experts and state officials say they need to know now whether they’ll get more funds. Governors are currently crafting their budgets and, for many, it will be their third year of contending with massive deficits due to declining tax revenues.”
According to the CNN report, “States are looking at a total budget gap of $180 billion for fiscal 2011, which for most of them begins July 1.” Compared with prior years, according to Sunshinereview.org, state budget shortfalls totaled $113.2 billion for FY 2009, and then rose to $142.6 billion in FY 2010.
“With shortfalls this large, and with no end in sight for the economic downturn, Congress is now running the risk of creating a permanent line on the budget to bail out profligate states,” Wilson said, adding, “Instead, the solution is tough medicine: states like California and New York need to scale back their budgets to be in line with revenue.”
Wilson called for “permanent tax relief and bringing state spending to be in accords with revenue, not the old way of simply tax, borrow, and spend, which fuels the insolvency crisis.”
According to the National Association of State Budget Officers (NASBO), state spending grew from $945.3 billion in 2000 to more than $1.5 trillion 2008, almost a 58.7 percent increased during the 2000’s, where revenues were generally rising because of inflated property values and what Wilson termed “a bubble economy.”
Wilson pointed out that states knew a downturn was coming as early as 2007, “but spending still grew by about $100 billion in 2008.”
“Instead,” Wilson urged, “the solution is to stop taking capital away from what would be productive sectors of the economy that could create new jobs, and redirecting it to areas that really do need to be cut. The solution is to let the true job-creators keep their money and invest it.”
An editorial published yesterday by ALG News warned that a states bailout would send the wrong message to markets and creditors: “With the federal national debt rapidly approaching $14 trillion, and the nation’s Triple-A rating already threatened, now is not the time to be sending the message that Washington exists simply to finance unsustainable operations.”
Wilson concluded, “Enough is enough with these public sector union kickbacks. It is not up to American taxpayers to go deeper into debt to put off the painful, necessary decisions that must occur at the state level.”