State-by-State Analyses Show State Budget Deficits? Impact

In addition to the National Priorities Project’s handy “State of the States” reports announced in the last Watcher, there is also a new set of fact sheets from AFSCME documenting the draconian cuts states have been forced to make to contend with their 3-year cumulative budget gap of $189 billion. A one-page fact sheet looks comprehensively at the cuts used by many states to meet their own constitutions’ mandates of a balanced budget. Some of the cuts recently used by states include releasing prisoners before completion of their sentences, cuts to higher education, increases in tuition at state universities, reducing funds for community services and child support enforcement, tightening eligibility requirements for the working poor and disabled for state Medicaid health plans, raiding state rainy day funds, and layoffs. Other state-by-state analyses will be available soon, which OMB Watch will note.

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Treasury Department Warns U.S. Will Reach Debt Limit Soon

Bush Sets Record on Deficit: According to a chart released by Reuters last week, this year's $304 billion deficit that arose under the Bush Administration's watch is the largest in the last 30 years. Though many economists agree that temporary deficits at a time of a slowed economy are beneficial, most are concerned that the permanent commitment of the country's vital resources to providing permanent and costly tax cuts to the very wealthy will only create more trouble for the economy in the long-run. The Treasury Department issued a warning last week that the federal government would soon reach its current borrowing limit of $6.4 trillion, if Congressional action were not taken to raise it. As reported in the June 24 edition of the Watcher, this announcement regularly sets up a struggle between the Administration and Members of Congress, who do not want to appear to be spending beyond the government’s debt limit. As this Washington Post article points out, this most recent announcement is particularly troublesome, given that the President is also requesting a $674 billion tax cut.

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Responses to President's FY 2004 Budget Proposal

The President issued his FY 2004 budget proposal February 3, which was received with accolades by some and with great criticism by others worried that several key education, housing and environmental programs would suffer under his proposed funding levels. Included in this article are links to OMB Watch analyses, as well as the responses of other organizations and Members of Congress.

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Program Assessment And Budget Cuts Ahead

This Administration has not made reducing the size and effectiveness of government a stated goal; however, the strides that are being made to devolve responsibilities to the states and to privatize government functions, deregulate and limit government oversight, and defund government by reducing federal (and often state) revenue through huge tax cuts, make the words unnecessary. One new and potentially effective tool in this effort to delimit the role of the federal government is the “Program Assessment Rating Tool,” or “PART.”

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Bush Budget Calls for Permanent Estate Tax Repeal -- At Great Cost

On February 3, Virginia’s House of Delegates voted 69-29 to repeal its state estate tax, bucking a trend among state legislatures to work to preserve the tax’s revenue in a time of record setting state deficits. Governor Mark Warner (D) had petitioned hard to preserve this piece of revenue for Virginia, which is facing an estimated 1.1 billion budget gap for FY 2004, but the vote is being touted by the Republican-controlled legislative body as a “veto-proof” majority. Though repeal advocates in Virginia argued that repeal would protect the state’s small farms and family businesses, data from the USDA and the Federal Reserve show that both the average large farm and family business in Virginia already fall well below the current $1 million exemption under federal law.

The President (faced with a 6 percent unemployment rate, increased homeland security needs and costs, and a projected $300 billion deficit for the coming year) has decided that repeal of the estate tax must be made permanent – at all costs. And the costs are great: nearly $56 billion in the first full year of repeal. But you wouldn’t know it from the President’s budget charts.

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President?s Budget Cuts Vital Programs and Makes Room for Costly Tax Breaks

In looking at this President’s budget, it appears that he is trying to be all things to all people. If we are to believe the President, there can be large increases for defense, smaller increases for homeland security spending, and the creation of new, large tax breaks for the nation’s wealthiest, including the acceleration and making permanent of previously enacted large income tax breaks – as well as a rational restraining of most other federal spending to contain the large deficits predicted for FY 2004 and beyond. However, the reality is that the large tax cuts already passed, coupled with the large tax cuts now proposed and the spending increases in defense and homeland security, will put added pressure to reduce long-term spending on domestic discretionary and entitlement programs – or cause the deficit to balloon.

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Bush Dividend Tax Cut Deepens Deficit-Ridden State Budgets

Far from providing desperately needed financial assistance to the states, Bush’s tax cut package would actually drain more than $4 billion from state treasuries each year. Take a look at what just his $364 billion dividend tax cut would do to your state.

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NPP Releases State of the States Report; ITEP Shows Who Pays

The National Priorities Project recently released two comprehensive reports that provide very useful state-by-state, as well as nation-wide, data. The Institute for Taxation and Economic Policy's Who Pays? A Distributional Analysis of the Tax Systems in all Fifty States shows that, on average, state and local tax systems require the poorest taxpayers to pay the highest effective tax rates.

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FY 2003 Appropriations Coming to a Close -- Finally

On January 23, on a vote of 69-29, the Senate passed H.J. Res. 2, a $390 billion omnibus appropriations bill in an effort to begin bringing the FY 2003 appropriations season to a close. Since Congress was unable to resolve its budgeting differences last fall during its election fervor, this bill combines into one large bill the 11 appropriations bills that were not completed before Congress adjourned in December. (The timeline for this appropriations bill was so rushed, in fact, that Senate and House Republicans agreed to completely bypass the House, which has the authority to originate all spending bills, and allow the Senate to begin action on the omnibus spending bill.)

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State Fiscal Crises' More News is Bad News

Local news and national papers alike have been replete with the troubling real results of the growing state budget shortfalls. These stories have broken down the astounding figures – $65 billion and $70-$85 billion budget gaps in FY 2003 and FY 2004, respectively – into their real, daily effects on ordinary citizens. By now, Kentucky’s decision to release prisoners before their sentences were up has become the poster-child for desperate states and their drastic budget-balancing measures. In other similar high-profile cost-saving efforts, some school districts in Oregon and Colorado have turned to a 4-day school week; others have stopped buying new textbooks; still others have cut school athletic and marching band programs; in some districts in Oklahoma, the schools have stopped hiring substitute teachers and are, instead, looking to parents to fill in for teachers. According to the International Association of Firefighters, the state and local budget gaps have resulted in layoffs, station closings, and other reductions in staff, even as new Homeland Security Secretary Tom Ridge calls on local contributions for domestic security.

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