Governors Attending:

Guests:

Discussion Subjects:

• Economic Development and Commerce (EDC) – surface transportation reauthorization
• Human Resources (HR) – The Uninsured: A Challenge for America's Health System; The EITC [Earned Income Tax Credit]: Tax Help for Working Families
• Natural Resources (NR) – Drought Preparedness: The National Agenda; and Energy Legislation: Prospects for State Issues
• Other Governors' Sessions – Governors-only work session on education and "No Child Left Behind" and solutions to challenges; special session on Medicaid reform; and special session on the smallpox plan
• Plenary Session Discussion Subjects - Education; state fiscal challenges; and legislative priorities

Points of Interest:

NGA Chair Paul Patton of Kentucky opened the meeting by telling fellow Governors that he had appointed a task force on school readiness to study the connections between early childhood programs and the K-12 educational system as well as to examine what policymakers needed to know about assessing young children. The task force was scheduled to present its findings at the following NGA annual meeting.

Six years after his first appearance at NGA's Winter Meeting, television and film actor and director Rob Reiner, who had begun the "I Am Your Child Foundation," told Governors that he understood the budget difficulties they faced. But he argued that for every dollar invested in early childhood development, states could expect a savings of between $4 and $7 through reductions in crime, teen pregnancy, drug abuse, welfare dependence, and school drop-out rates.

Dr. Craig Ramey of the Georgetown Center of Health and Education talked about the "Abecedarian" (meaning one who learns the fundamentals of something) project that he and colleagues had begun 32 years earlier for the purpose of determining whether it was possible to alter human development through high quality pre-school programs. Infants in the experiment's "control" group were provided with nutritional supplements, family support, social services, and health care. But in addition to those forms of assistance, infants in the "treated" group were made part of an intensive early childhood education program. During the first year, children in the two groups performed similarly. But they diverged at 18 months. By 3 years, the treated group had an IQ average of 101, compared with 84 for the control group. And by 4 years, only 45 percent of control group children were scoring in the intellectually normal range.

In a follow-up study of the children, it was found that the treated group achieved reading and math skills at a higher level from the time they were in the third grade. In addition, they were more likely to have postponed having children as well as to be employed in higher skills jobs.

Ramey said that not all early childhood education programs worked well, and he stressed that the least successful among them tended to have poorly prepared teachers, were lacking in intensity, and focused on remedial rather than preventive education. He urged Governors to provide strong leadership for early childhood initiatives linked to K-12 learning and achievement, as well as to ensure the inclusion of a strong accountability program to monitor program quality and to document child progress and outcomes.

Opening a discussion of federal fiscal relief to the states, Governor Patton noted that states had faced budget shortfalls totaling $100 billion over the past two years and were expected in the coming fiscal year to face an unprecedented shortfall of $82 billion. Whatever method was chosen to address the shortfall—whether it be tax increases, program cuts, and/or layoffs—the effect would be negative on the American economy. The Governor went on to say that NGA had worked with Republican Senator Susan Collins and Democratic Senator Ben Nelson to craft a bipartisan bill that sought to provide the states with $10 billion in federal fiscal relief. Although the bill had passed the Senate but not the House in 2002, Governor Patton felt that it now had the momentum to carry it through both houses of Congress in 2003. In fact the Collins-Nelson bill had already been reintroduced, this time raising the proposed relief level to $20 billion, and several other Senate bills proposed even higher aid, although unlike Collins-Nelson, they were targeted to specific programs such as homeland security.

In his address to the Governors, Senator Larry Craig of Idaho said that states had made the same mistake the federal government had made in the past by engaging in excess spending in the aftermath of the prosperous 1990s. He noted that federal grants to states had risen 159 percent since 1990, and constituted 17 percent of the federal budget, compared with 10 percent in 1990. In short, he argued that a program of purely fiscal relief would be a difficult sell, and recommended instead that assistance be targeted to meet rising costs that states were powerless to control, such as health care and Medicaid.

Governor James Doyle of Wisconsin responded that programs previously within the realm of the federal government were now falling more heavily on states, among them dual eligibility of low-income seniors for both Medicaid and Medicare. In addition, he said, school systems were facing special education costs that the federal government had failed to adequately fund, despite its promises to do so. Senator Craig agreed that the federal government should increase its funding for special education, but he said that federal and state officials needed to work more collaboratively toward program reforms.

Some Governors agreed that a federal bailout of the states would ultimately be harmful to the economy, and during an Executive Committee meeting, a motion favoring federal fiscal assistance to the states was tabled.

During another plenary session, members of Congress from both parties talked to the Governors about the fiscal relief question as well as about other issues of concern.

Republican Senator Bill Frist of Tennessee focused his address on welfare reform, bioterrorism and first response, and health care. He said that welfare reauthorization would continue at the current level of funding for the TANF (Temporary Assistance to Needy Families) block grant to the states, despite the decline in their welfare caseloads, while at the same time strengthening work requirements.

With respect to bioterrorism, he said that the public health system had long been underfunded. In fact prior to 9/11, nine out of ten public health departments did not have bioterrorism staff and one-third of public health departments serving small communities had no Internet access—an unacceptable situation considering the need for rapid communication in response to any bioterrorist attack. To remedy this situation, Senator Frist told Governors, legislation had just been signed to accelerate first response funding.

Finally, Senator Frist said that an imbalance between existing federal policy and the aging of our population needed to be corrected. With the number of seniors expected to double in the coming 30 years and the number of workers supporting seniors expected to decline from 4 to 2.3 in that same period, Frist stressed that funding increases would be necessary. He acknowledged that 14 to 15 million seniors were eligible for both Medicaid and Medicare, and said that new benefits such as coverage for prescription drugs—the cost of which was the fastest-growing component of Medicaid—would help alleviate the financial pressures associated with the dual eligibility issue.

Speaking from the Democratic perspective, Senator Byron Dorgan of North Dakota told Governors that the nation needed an economic stimulus plan but said that he opposed the President's $600+ billion proposal in part because of its exemption of dividends from income taxation. He expressed the view that whatever plan was enacted should include assistance to the states because of the many mandates that the federal government had imposed on them, including Medicaid, No Child Left Behind, and special education. And he argued that if the federal government could provide aid to foreign countries, it should provide aid to the states.

The Senator also expressed the view that states should be empowered to collect taxes on Internet sales.

Republican Representative Michael Castle—former Governor of Delaware—said it was unlikely that there would be a financial bailout of the states. Like Senator Craig, however, he advocated targeted assistance in such areas as education programs.

Democratic Representative Steny Hoyer of Maryland said that the House Democratic leadership was committed to helping states. He spoke out against the President's tax plan, which he said would restrict funding for vital priorities that affected the states such as homeland security, education, and health care. He also stressed that the President's plan to eliminate the dividend tax would erase the tax advantage of tax-free state and local bonds. Without that advantage, governments would be forced to raise interest rates to attract buyers, thereby boosting the cost of government borrowing.

In place of the President's proposals, Hoyer said that the Democrats' plan would provide every American with a 10-percent tax cut for the first $6,000 of income. And it would provide significant relief to the states, including $10 billion for Medicaid cost sharing, $10 billion in federal grants to help states with unmet homeland security needs, and additional $5 billion for highway funding, and $6 billion for the states' discretionary use.

Memorable Quotes:

In support of seeking federal fiscal relief for the states, Governor Paul Patton of Kentucky said: "Over the past two fiscal years, states have faced budget shortfalls of $100 billion…For the upcoming fiscal year, states are collectively expected to face an unprecedented $82 billion shortfall in revenue, needed to maintain existing services…states are forced to confront difficult situations that may include painful cuts in vital services, laying off employees, or increasing taxes to close these massive shortfalls. Irrespective of what actions are chosen, the states' fiscal crisis will be a major drag on the national economic recovery. To provide the most powerful stimulus to the economy, the federal government should provide significant, immediate, temporary fiscal relief to help states…This crisis is not about state budgets. It's about the people. It' about providing health care for our must vulnerable citizens. It's about ensuring public safety and security. It's about guaranteeing that every child has access to a quality education. And it's about creating an economy that will provide good-paying jobs for our people."

Governor Mike Johanns of Nebraska said the following regarding federal fiscal relief to the states: "The 1990s were a great time. There [was] a lot of money lying around, a lot of new programs. I would also suggest [with respect to] a massive bailout—we should be careful what we wish for. All that's going to do is create one enormous cliff to fall off of. I look back at the welfare reform days…[the] impact was not to go to Washington and say shovel more money at us. [It] was to say give us greater ability to manage our programs as the local level. I certainly get the impression that this Administration is reaching out to Governors to say let's try to do that in some other areas. Now, as we all know, this is somewhat uncharted waters. But that's where I think we can have the greatest impact…[o]n a long-term permanent basis…Flexibility does make a heck of a difference in how we manage our programs…"

Senator Byron Dorgan of North Dakota said this of the need to develop a national energy policy: "…you put gasoline in a 1924 Ford the same way you put gasoline in a 2003 Ford…[o]ver half of that…is imported, a substantial portion of it from very troubled parts of the world which would hold our country hostage if, God forbid, something happened tonight to interrupt that supply. If our energy policy is simply dig and drill, then it is a policy called yesterday forever, as far as I'm concerned, and that will not best serve this country…in addition to producing more, which has to be part of [an] energy bill because you need a transition period…you need efficiency, you need conservation, and then you need big ideas like limitless and renewable sources of energy that take us well into the future."

Selected Policy Positions Adopted:
(1) Creating a comprehensive policy on homeland security; (2) expressing the belief that all funds awarded to states in settlement agreements go to them, with no other level of government having claim; (3) supporting maintenance of current funding for Section 8 housing vouchers; (4) calling for increased federal appropriations to the Superfund program; (5) recommending that states and the military services act to assist local governments in developing and implementing better planning for compatible land uses near military installations; (6) recommending a mechanism for states to coordinate siting of interstate electricity transmission lines; (7) urging renewal of the abandoned mine reclamation fee; (8) requesting flexibility to serve legal immigrants with Temporary Assistance for Needy Families (TANF); (9) calling on Congress to increase its financial support to states and local educational agencies for education as a result of the new requirements placed on them under "No Child Left Behind;" (10) urging that all homeland security funds earmarked for local jurisdictions be distributed through states and territories; and (11) expressing support for increased federal funding for child care should Congress strengthen work requirements for the Temporary Assistance for Needy Families (TANF) block grant as part of welfare reform reauthorization.