The Sunday Take

The Take: Governors on the Front Lines of Battle With a Struggling Economy

From left, governors Haley Barbour (R-Miss.), Joe Manchin III (D-W.Va.) and Jim Douglas (R-Vt.) listen to Brian Schweitzer (D-Mont.) discuss some of the concerns at the National Governors Association meeting in Biloxi, Miss.
From left, governors Haley Barbour (R-Miss.), Joe Manchin III (D-W.Va.) and Jim Douglas (R-Vt.) listen to Brian Schweitzer (D-Mont.) discuss some of the concerns at the National Governors Association meeting in Biloxi, Miss. (By Rogelio V. Solis -- Associated Press)
By Dan Balz
Sunday, July 19, 2009

BILOXI, Miss. These are grim days for governors. Here's one example: Offered an invitation to spend a weekend on the waters of the Gulf of Mexico at the annual meeting of the National Governors Association, more than half the nation's governors politely declined.

Budget issues have kept some governors at home, including the chairman of the NGA, Pennsylvania's Edward G. Rendell (D). He decided it wasn't wise to leave his state on the first "payless payday" for state workers. "Not a very good move for me to go down to Biloxi," he said by telephone.

The governor of the hardest-hit state, California's Arnold Schwarzenegger (R), is also a no-show because he is struggling with his legislature to close a $26 billion budget deficit. Legislative leaders reported Saturday that after two weeks of hard negotiations, they were moving toward a solution. Meanwhile, the state has been issuing IOUs in lieu of payment.

Others governors who have resolved budget problems for this fiscal year may simply be skittish about leaving home to stay at a resort hotel and casino, even if the purpose is to spend time talking about issues of mutual interest and concern. They may rightly believe constituents would not look kindly on the use of taxpayer funds for a summer getaway.

Others are generally keeping a low profile; for example, South Carolina's Mark Sanford (R) isn't here after recently admitting to an extramarital affair. Neither is Alaska Gov. Sarah Palin, who is contemplating her next moves in the final days of her self-shortened term. Florida Gov. Charlie Crist has already decided he'll try to become a senator and is spending the weekend in New York raising money for his campaign.

But the real reason things are grim is that governors, like their constituents, are grappling with a terrible economy, one that has thrown their budgets into the red. The Nelson A. Rockefeller Institute of Government reported Friday that state tax revenue dropped 12 percent in the first quarter of 2009, the biggest decline since at least 1963. Preliminary data for April and May from 45 states suggest an even sharper plunge is underway in the second quarter, approaching 20 percent over the same period a year ago, according to the institute.

The federal stimulus package has helped cushion the blow, and there's hardly a governor here who doesn't have good things to say about the money (though as always, some would prefer greater flexibility in how to spend it). "We have been able to dodge a bullet, but we will not go unscathed," West Virginia Gov. Joe Manchin III (D) said Saturday.

But even with the stimulus money, states face collective deficits of more than $200 billion in the next few years. Governors are already talking about the moves they may have to make once the stimulus money disappears after 2011, especially if the economy is not growing at a substantial pace.

"We have to restructure our state governments . . . so we are ready to get along without these resources in a couple of years," said Vermont Gov. Jim Douglas (R), who will take over the NGA chairmanship on Monday.

As they do that, governors may have another looming fiscal burden. The health-care bills moving through Congress include a significant expansion in Medicaid, which is funded by the federal government and the states. An NGA official estimated that the cost of that expansion could be around $60 billion a year.

How might states pay for their share? Maybe not at all, at least for the first few years. One proposal has called for the federal government to pick up permanently the cost for those newly eligible for the program. Another proposal floated earlier was for the federal government to pay the entire bill for five years.

But as congressional committees wrestle with projections that show health care turning into a budget buster, they are looking for ways to strip away costs. Governors have already been warned that 100 percent federal financing is now very unlikely. More troubling proposals have been under discussion.

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