Governors may ask Congress for cash

The nation's governors may ask Congress this year to help them through their collective budget crisis by providing the funds needed to cover part of their fiscal 2003 deficits, said Ray Scheppach, executive director of the National Governors Association of Washington.

Should Congress consider a short-term stimulus package this year, the governors likely would request about $30 billion - more than half of their aggregate budget shortfalls - to cover their deficits, Scheppach told government and industry officials at the "Outlook 2003 in the States" conference, sponsored by Governing magazine in Washington today.

"If there's a stimulus bill, [states] want to be a part of it," Scheppach said.

The move to give financial relief to states, if adopted by Congress, could be one of the most important cures for the ailing national economy, he said.

Governors and state lawmakers are considering unprecedented cuts in key programs, such as public schools, higher education and Medicaid, to stem the deficits. Federal funding to states via a stimulus package would provide money for these and other programs.

"You've got government being a net drag on the economy," said Harley Duncan, executive director of the Federation of Tax Administrators of Alexandria, Va.

The state budget shortfall is growing by leaps and bounds, said state budget experts at the conference. States are facing an aggregate state budget shortfall of about $50 billion for fiscal 2003, according to state budget experts at the conference. The shortfall for 2004 is expected to hit about $70 billion, they said.

The state fiscal crisis is likely to last for another three to five years, Scheppach said.

While states would likely receive fiscal relief from Congress in a short-term stimulus package if it were passed this year, they would not likely receive assistance if Congress instead approves a long-term economic growth package, Scheppach said.

States will be entering their fourth straight year of budget shortfalls next year, said Corina Eckl, director of the fiscal affairs program for the National Conference of State Legislatures of Denver.

"It's extraordinary that states are experiencing such [severe] budget gaps," Eckl said. "This is a huge problem that doesn't seem to have an immediate end."

To get started on the road to financial recovery, states must tackle three challenges, Scheppach said. They must downsize government operations, reform their tax systems and get relief from the federal government for Medicaid.