Governors Look to Obama as States Confront Budget Shortfalls
When Barack Obama meets Tuesday in Philadelphia with governors of both parties, an additional dimension of the credit crisis and financial meltdown will come into focus. We have heard a lot about the collapse of housing prices, the threatened or actual bankruptcy of many banks, and the rise in unemployment. Individuals, families and firms of all sizes have been clobbered by these events.
What the governors will point out to the president-elect is that most of their budgets are in such trouble that their states may not be able to meet their responsibilities to their residents. When Obama puts his economic rescue plan together later in December, he will have to build in significant aid to state and local governments, lest they add to the public woes by slashing their own spending to meet the constitutional requirements for balanced budgets in most states.
Living in Chicago, Obama is already well aware of the problem. His willingness to call this meeting less than a month into the transition has been welcomed by governors of both parties. Veteran officials cannot recall a similarly early summit of governors and a newly elected president.
When I spoke with Gov. Joe Manchin of West Virginia, the head of the Democratic Governors Association, the other day, he was effusive in his praise of Obama for reaching out to the governors of both parties. Manchin's state voted for Hillary Clinton in last spring's Democratic primary and for John McCain in November. But he insisted that Obama had gone more than halfway in involving governors during the campaign and now in the transition.
Manchin said he had advised other governors to be prepared when they meet Obama to talk in specifics about the biggest challenges facing their states. "I don't want to see us going there with our hands out," he said. "I want us ready to roll up our sleeves and go to work with Washington."
That is brave talk, but the reality is that state and local governments from one end of the country to the other are hurting badly. Tomorrow, the National Governors Association and the National Conference of State Legislatures are holding a bipartisan phone-in news conference to "outline the current fiscal situation and urge Congress and the next administration to provide a recovery package that will spur job growth, support infrastructure projects and ease the burden of Medicaid costs."
The House passed such a measure recently, but it died under threat of a veto by President Bush. It is almost a certainty that Obama will support and sign such a bill.
The help is urgently needed. In Philadelphia, Mayor Michael Nutter announced recently that he was closing 11 libraries, laying off 220 workers, eliminating 600 other unfilled positions, postponing a promised tax cut and slicing his own salary by 10 percent.
In Obama's Chicago, Mayor Richard Daley, looking at a budget shortfall of almost half a billion dollars, has called for hundreds of layoffs. In Atlanta, the fire department is losing people. In Seattle, it's housing for the homeless that is taking a hit. New York -- where Wall Street has hemorrhaged jobs -- measures its shortfall in the billions and is whacking education, police and almost every other service.
The forced cutbacks in state and local spending hit the most vulnerable of our citizens. And they damage the prospects for a strong and swift economic recovery.
The federal government is following the Keynesian blueprint by rapidly increasing its spending -- letting deficits explode past the trillion-dollar mark in hopes of stimulating the private economy. But if declining tax revenue and increasing Medicaid and welfare payments force state and local governments to cut back, that will work against the stimulus.
Obama and the governors are in this together. It is good that they are meeting now and important that their dialogue continues when he takes office.