Governors Attending:

Guests:

Discussion Subjects:

• Economic Development and Commerce (EDC) – the future of the telecommunications industry
• Education, Early Childhood, and Workforce (ECW) – helping all students achieve secondary and postsecondary success
• Health and Human Services (HHS) – keeping your state fit: prevention, physical activity, and the President's challenge; and options for, and advantages of, home health care
• Natural Resources (NR) – the Endangered Species Act at 30 years, and steps for the next generation
• Other Governors' Sessions – special session on the national challenge of prisoner reentry
• Plenary Session Discussion Subjects - A lifetime of health and dignity; technology, productivity, and U.S. manufacturing capacity; and critical issues in the second session of the 108th Congress

Points of Interest:

Journalist Jackie Judd moderated a panel discussion on the subject of aging with dignity. Dr. Kenneth Cooper—considered by many to be the ‘father of aerobics'—focused on the importance of exercise for maintaining good health. Between 1968 and 1984, he said, the number of adult Americans who exercised regularly rose from 24 to 59 percent. And between 1968 and 1990, there was a 48 percent decrease in heart attack deaths in the United States, two-thirds of which was attributable to lifestyle changes. The trend did not continue, however, because the baby boom generation with whom it began experienced burnout, and succeeding generations were relatively inactive. In fact, Cooper offered the stark statistic that because of rising childhood obesity, one out of every three children born in this country after the year 2000 would have adult-onset diabetes before age 14. And he said there was a correlation between low physical fitness and low academic achievement among children.

Dr. Cooper stressed the importance of getting back to a focus on fitness in our society, noting that the average life expectancy of the "low fit" (meaning the bottom quintile of the population in terms of fitness) was now 73 years, compared with 82 years for the highest fit (meaning the top two quintiles). In addition, those in the bottom quintile of the fitness scale cost on average $419,000 for hospitalization, while rising just one quintile higher reduced hospitalization costs by more than 50 percent. Cooper proposed that monetary incentives be offered for people to stay in shape—giving higher tax deductions to non-smokers, for example. And he said that addressing childhood health problems should begin with school lunch and physical education programs.

Bob Novelli of the American Association of Retired Persons (AARP) said that his association had a 10-year social impact agenda, the core of which was for people 50 and older to have independence, choice, and control in ways beneficial and affordable for them and for society. Novelli said that a greater number of Americans wanted to grow older at home rather than moving to facilities for the elderly, which meant that we needed to create more livable communities for the aging that included handicap-friendly housing and accessible services. People needed to be educated about planning for long-term care, and health care providers needed to focus not just on acute care but on quality of life and management of disease. And of critical importance was for adult caregivers—who provided 80 percent of care to the elderly but without any pay—to be given assistance in the way of tax credits, emotional peer group support, and respite services such as adult day care.

Joe Coughlin of the Massachusetts Institute of Technology (MIT) AgeLab said that baby boomers were already spending $20 billion out of pocket on health care alternatives ranging from acupuncture to special mattresses. He noted that one in four families in the United States was providing caregiving to an older adult, at a potential cost of $29 billion in lost productivity due to the absence of caregivers from their own jobs.

Coughlin focused on the benefits of technology for the aging population, citing such examples as: (1) making transportation more accommodating to the elderly and more cost efficient through technological advances; and (2) using medical technology to provide screening outside of traditional health services facilities. He asked Governors to imagine that a screening device such as a blood pressure machine located in a drugstore was connected to a telemedical provider that could provide rapid diagnostic feedback. And he closed by encouraging Governors to consider three "p's": prevention; public empowerment/responsibility (i.e., ensuring that people were provided with adequate sources of information to guide their health decisions); and partnering (e.g., encouraging retailers such as pharmacies to become involved and helping employers via tax incentives to encourage wellness in their workforces).

At another plenary session, a panel—moderated by Lou Dobbs of CNN—discussed the impact of economic globalization on the American economy. Panelist David Hale said that although manufacturing had declined from 40 percent of our labor force in 1940 to its current 12 percent, it still accounted for 14 percent of the gross domestic product and was responsible for nearly half of annual research and development expenditures. In addition, the inflation rate in the manufacturing sector was traditionally less than half the rate for the economy as a whole, and it gave Americans higher compensation than did other economic sectors. Hale emphasized that despite rumors to the contrary, the U.S. share of global exports was holding its own. In 2003, for example, it constituted 13 percent of the world's exports—the same percentage as 25 years earlier. Hale also told Governors that manufacturing jobs were broadly distributed across states, and typically provided between 12 and 18 percent of jobs in major states.

Hale conceded, however, that since the year 2000, manufacturing employment had declined 16 percent, or nearly 3 million jobs. In fact George W. Bush was the first American President since Herbert Hoover to preside over job losses for the whole of his Administration. Hale went on to say that although such declines had happened before, what made current conditions unique was the fact that manufacturing kept shrinking even as the rest of the economy showed recovery. Among the underlying causes were the push toward productivity growth and the unraveling of the 1990s high-tech and telecommunications boom. Hale also likened the change to our shift away from an agricultural society, noting that between 1940 and 1970, farm output increased by 60 percent due to modernization, even as the number of Americans working on farms declined from 20 percent of the population to just 4 percent.

Dick Dauch of the National Association of Manufacturers was more critical about the loss of manufacturing jobs, citing intense and often unfair competition from foreign producers, and accusing some of our trading partners of imposing illegal barriers to American products, engaging in rampant piracy of our patents and copyrights, and manipulating currencies to make their exports cheaper than ours. But he cited home-based obstacles as well, among them taxes, health and pension benefit requirements, tort litigation, regulation, and rising energy prices.

Jeff Bleustein of Harley-Davidson focused his address on ways in which American products such as his company's motorcycles could continue to excel in the worldwide market. Using Harley as an example, he offered the optimistic view that productivity improvements did not necessarily lead to job losses. He said that in the mid-1980s, when his company began a focus on improving productivity, Harley employed 2,000 workers. Every year since then, productivity had increased, and the staff had now more than quadrupled, though he conceded that many workers needed to be retrained in order to perform successfully.

Bleustein said that among the key ingredients to the vitality of the manufacturing sector were: (1) manufacturers helping themselves to compete by pursuing excellence, breaking down barriers between management and labor, educating employees, using new business models, and applying new technologies; and (2) securing a level playing field by maintaining open markets and seeking the removal of tariff and non-tariff trade barriers. With respect to the latter issue, he again used Harley as an example, telling Governors that Japan had at one time imposed stringent requirements—including a test that was the equivalent of riding a motorcycle across a balance beam—on anyone seeking to secure a license to operate a large motorcycle. Bleustein said that although the requirement was couched in terms of safety, it was clearly designed to keep Harley-Davidson motorcycles out of Japan. Fortunately, after years of lobbying, the company succeeded in having the requirement lifted. Bleustein also attributed the success of Harley to marketing that distinguished the firm's products.

Prefacing a question for the panelists about the value of incorporating labor and environmental standards in trade agreements, Democratic Governor Jennifer Granholm of Michigan said that during the first three years of George W. Bush's administration, only 3 complaints had been brought to the World Trade Organization about unfair trade practices against the U.S., compared with 27 complaints during the last three years of Bill Clinton's administration. In an apparent effort to circumvent partisan discussion, Lou Dobbs intervened, noting that trade deficits had existed under both Democratic and Republican administrations, and charging that corporations were as responsible as government was for our nation's trade problems.

During a final plenary session, House Democratic Leader Nancy Pelosi cited four areas in which she felt the federal government needed to rebuild its partnership with the states and in which the Governors' help was needed:

• Homeland security. She complained that the Bush Administration's budget proposed $1 billion in cuts for homeland security and bioterrorism grants and included no specific funds to protect ports and nuclear and chemical plants. She noted that Democrats on the Homeland Security Committee were about to release a report on where security gaps existed and what needed to be done to protect America from the threat of another terrorist attack.
• Job creation and infrastructure investment. Pelosi told Governors that over the past three years, record budget surpluses had turned into record deficits, and the loss of jobs—particularly in the manufacturing sector—was staggering. What the country needed, she said, was an investment in our national infrastructure that would help create high-paying jobs immediately. She advocated enactment of the bipartisan Transportation Equity Act for the 21st Century, which called for an infrastructure investment of $300 billion over six years. She argued that for every $1 billion invested, 47,500 jobs would be created. In addition, infrastructure investments would: (1) enable the efficient movement of people and products; (2) help reduce congestion and limit pollution; and (3) enhance homeland security by improving ports of entry and other features of our infrastructure that might be vulnerable to attack.
• Education. Pelosi charged that the President's budget short-changed his own "No Child Left Behind" bill by $9.4 billion, and short-changed special education by $2.5 billion. She also argued in favor of raising funding for Pell Grants to help disadvantaged students complete a college education, saying that the amount of state school tuition covered by the grants had declined from three-quarters to barely one-third.
• Health care. Representative Pelosi objected to newly-enacted Medicare prescription drug legislation, because the requirement for states to fund a Medicare benefit would deprive them of Medicaid savings and make it more difficult for them to provide prescription drugs to dual-eligibles (i.e., seniors eligible for both Medicare and Medicaid). Pelosi said that Democrats also wanted to repeal provisions of the new law that prohibited the Secretary of Health and Human Services from negotiating lower drug prices, as well as to legalize the safe importation of prescription drugs from Canada and other foreign countries. She also told Governors that she and Senate minority leader Tom Daschle were working on an adjustment to the federal matching rate for Medicaid, designed to provide more money to help states meet rising health care costs.

In his address from the Republican perspective, Senate Majority Leader Bill Frist described the recently-enacted Medicare prescription drug bill, under which seniors were to be issued cards verifying their eligibility for drug discounts of generally 10 to 25 percent. Offering his own state as an example, Senator Frist said that Tennessee seniors would receive $261 million in savings as a result of the new prescription drug benefit.

Frist went on to say that Senate welfare reauthorization legislation would continue TANF (Temporary Assistance to Needy Families) block grant funding to the states at its current level, and he expected child care provisions to be enhanced—including greater flexibility for state administration.

The Senator anticipated an extension of the current Transportation Equity Act while Congress considered a more comprehensive reauthorization. He also noted that the Senate had passed a six-year, $290 billion reauthorization for infrastructure improvements, which was awaiting action in the House of Representatives.

Governor Ed Rendell of Pennsylvania asked for Senator Frist's position on Internet taxation. The Senator responded that two goals needed to be achieved: to facilitate the use of technology; and to ‘do no harm' to the states. He pointed out that there were differing views on the issue even within the Republican Party, but he expected that the subject would be considered by Congress during its current session.

Memorable Quotes:

NGA Chairman Dirk Kempthorne, in opening a panel discussion on the effects of economic globalization, said: "As Governors we're aware that one-fifth of all general revenue spending goes to Medicaid with a significant share of that funding going to spending on institutional long-term care. We also know as sons and daughters, as husbands and wives, that our loved ones want to age with health and with dignity in the homes and communities in which they have lived. More importantly, we must consider what Governors can do to encourage best practices in home and community-based care while inspiring our citizens to maintain lifelong health and prepar[e]… to meet their own long-term health care expenses."

Nancy Pelosi, Democratic Leader of the U.S. House of Representatives, said: "…the way to improve education is for the federal government and the states to work together towards shared goals, not by decrees from on high from Washington, not by more mandates without the money…The federal government must also be a better partner when it comes to Medicaid. That's why…Democrats share your concern that we should not require prior federal approval of state Medicaid budgets and add bureaucratic barriers that states must clear before receiving needed Medicaid funding."

Selected Policy Positions Adopted:
(1) Calling on the U.S. Department of Agriculture to coordinate with the Department of Homeland Security to protect against threats to agriculture, asserting that states should be full partners in the development and implementation of Farm Bill conservation programs, and calling for federal assistance to state programs supporting small farm marketing and small farm product access to local markets; (2) clarifying the Endangered Species Act's purpose as "conservation" rather than "protection;" (3) calling for flexibility in meeting state matching requirements for early childhood education programs; (4) expressing support for basing educational outcomes for students under the Individuals with Disabilities Education Act (IDEA) on each state's measurement of adequate yearly progress as required by the No Child Left Behind Act rather than on separate student performance criteria; (5) encouraging partnerships among community members to reinforce the importance of child and adult literacy; (6) signifying the Governors' commitment to a sufficient and well-trained public health workforce, an adequate vaccine supply, preparedness for a smallpox attack or other bioterrorism attack, and a coordinated effort between states and the federal government to prevent and control chronic disease; (7) calling for broadened waiver authority for states with respect to food stamp eligibility, and emphasizing the importance of raising the minimum food stamp benefit for the elderly and disabled; (8)emphasizing that Governors should continue to have the flexibility and authority to administer the Low-Income Home Energy Assistance Program (LIHEAP); (9) highlighting Governors' opposition to the severity of the current penalty against states for failing to meet specified targets to measure reduced tobacco sales to minors under federal law; (10) reaffirming the Governors' willingness to work with their federal partners to ensure successful implementation of the new Medicare prescription drug law; and (11) articulating the Governors' commitment to work with Congress and the Administration in developing bipartisan solutions to the problem of the lack of health insurance for 43 million Americans.