Governors from both parties urged Congress on Saturday to avoid drastic budget cuts and to put to rest any talk of allowing states to file for bankruptcy.
State leaders kicked off the three-day winter meeting of the National Governors Association with a bipartisan plea for lawmakers to avoid deep cuts to state funding as Congress negotiates a budget bill for the rest of the fiscal year. States are still recovering from the recession, governors said, and deep cuts could send them over the edge.
Governors are particularly worried about deep budget cuts proposed by the Republican-led House in its Continuing Resolution, including cuts to Medicaid and education funding and the termination of the Workforce Investment Act that's helping 8 million unemployed Americans find work. The cuts would come just as states are set to lose millions of dollars this year as the 2009 Recovery Act's temporary boost in Medicaid and education funding dries up.
State leaders said they've cut spending by more than $75 billion -- or 10.7 percent -- over the past two years but still face a cumulative budget shortfall of $175 billion.
Indiscriminate cuts, Gregoire said, risk not only states' recovery but the entire nation's as well. She cited as evidence a new Department of Commerce report released Friday that suggests the 2.4 percent drop in state and local spending in the fourth quarter of 2010 hurt the economy.
Governors also called for more flexibility to implement federal laws. The issue is at the core of many states' objection to the healthcare reform law's massive Medicaid expansion but affects other policy areas as well.
"We are forced to balance budgets, but we can help our states and we can slow down the layoffs of a lot of private and public sector jobs, if the states are given flexibility," said Maine Gov. Paul LePage (R). "And we are lacking flexibility in a lot of areas. For instance, we are restricted in our state from cutting trees because of some of the federal policies. Ninety-three percent of our state is a forest. Think about that."
One option many governors flat out reject, however, is a proposal to allow states to file for bankruptcy as a way to restructure their long-term financial obligations such as promises to retirees. The idea has been floated by former House Speaker Newt Gingrich along with several Republicans in Congress, but governors say it would devastate states that rely heavily on the municipal bond market to finance investments.
"There are other tools - some of them are political and some of them are legal - to use in your relations within your own state," said Gov. Dannel Malloy (D-Conn.). "But please, don't destroy the municipal bond market."
The winter meeting is a chance for the nation's governors -- included a record 29 freshmen -- to get to know each other. It will also offer Gregoire a chance to push her initiative as NGA chair, the "complete to compete" challenge aimed at getting more young people to finish their educational degrees; within a few years, she said, two thirds of U.S. jobs will require a degree.
"At present," she said, "our country is not ready to meet this workforce demand."