Vilsack 5 22 ltr Reinventing GoTHOMAS J. ViLSaCK
GOVERNOR
OFFICE OF THE GOVERNOR
SALLYJ. PEDERSON
LT. GOVERNOR
Michael C. Van Milligen
City Manager
City of Dubuque
50 West 13th Street
Dubuque, Iowa 52001-4864
Dear Michael:
May 22, 2003
As a follow-up to the letter dated April 30, 2003, that I sent to all mayors and county
supervisors explaining the need for the Reinventing Government Bill, I am writing to let you
know what we are doing at the federal level to help local government. Please contact your
mayor or supervisor for a copy of that letter. On May 13, I talked with representatives and the
board members of your state associations about the reasons for this bill and measures being taken
by Congress to provide funding to state and local governments.
First, I would like to correct an error in the previous letter. The Innovation Loan Fund
was proposed to tap seed money for investments in technology, not biotechnology.
Second, individually and as amember of the National Governors Association, Ihave:
urged Iowa's U.S: Senator Charles Grassley, as Chairman of the Senate Finance Committee, to
include fiscal relief for state and local government in the federal tax recOnciliation bill, S: 1054,
pending before Congress. As a former mayor, I believe the federal government must provide
greater fiscal relief to state and local governments for homeland security, Medicaid, and other
areas~
Senator Grassley has successfully included a $20 billion fund to help budget-strapped
state and local govenmments in S. 1054, as approved by the Senate with a strong bipartisan vote.
It would provide $10 billion for Medicaid reimbursement increases and $10 billion for flexible
block grants to state and local governments. About $6 billion of the flexible assistance grants
would be allocated to states and $4 billion would be allocated directly to local governments.
Iowa's total share under this Senate bill would be about $180 million.
This federal relief would cover part of the loss of ftmds for local governments in Iowa's
FY 2004 budget as a result of the economic downturn: I caution that the bill still hasto be
approved by a joint House-Senate conference committee~ where changes will most likely occur
because the House bill does not have similar relief for state and local governments.
I am attaching a press release by the National Governors Association and a very
preliminary analysis of how such fimds would be distributed among the states.
STATE CAPITOL DES MOINES, IOWAS0319 515281-5211 FAX515-281-6611
Finally, I want to reiterate that the Public Strategies Group (PSG) is available, either
directly or through the Iowa State Association of Counties and the Iowa League o£ Cities, to
assist you with process improvements. PSG is an experienced and creative consultant that has
ideas to help you develop and implement strategies for improving services in a period of
declining revenues. I strongly encourage you to contact PSG by calling Babak Annajani at 515-
242-5261, babak~psgrp.com.
Thank you again sharing your concerns with me about this issue.
Sincerely,
Thomas J. Vilsack
Governor
Siate Budget Outlook Remains Bleak
WASHINGTON - Say/ng states face the most dire fiscal situation since World War II, the National
Governors Association and the National Association of State Budget Officers released a report today
that concludes many states have exhausted budget cuts and drawing down rainy-day funds and that the
most difficult decisions still lay ahead.
The associations' biannual report, The Fiscal Survey of States, (in PDF) found that despite significantly
curtailing state spending, 37 states were forced to reduce their enacted budgets by about $12.8 billion in
fiscal 2002. About mid-way through the current fiscal year, 23 states plan to reduce their net enacted
budgets by more than $8.3 billion.
"The fiscal crisis is affecting states across the country," said NGA Executive Director Raymond C.
Scheppach. "This is a result cfa convergence of four major factors that have battered almost every state
budget to the point where there just are no easy choices left. The combination of long-run deterioration
in state tax systems coupled with an explosion of health care costs are creating an imbalance between
revenue and spending. To make matters worse we've had a collapse of capital gains tax revenues added
to the overall loss of revenue attributable to slow economic growth."
To plug their budget gaps in fiscal 2002, 26 states used across-the-board cuts and used rainy day funds,
15 states laid off employees, 13 states reorganized programs, and 31 used a variety of other methods, the
Fiscal Survey found.
Two-thirds of states report spending growth of less than 5 percent in both fiscal 2002 and 2003. An
astonishing 16 states experienced negative growth in fiscal 2002.
States' fiscal 2003 year-end balances clearly illustrate the extent of the budget problems. Total state
balances are estimated to be only $14.5 billion or 2.9 percent of expenditures in fiscal 2003. That
represents a 70-percent plunge since fiscal 2000, the peak of balances. Balances of 5 percent of
expenditures are generally considered by analysts to be healthy.
Dwindling tax collections continue to plague states. In fiscal 2002 sales tax collections were 3.2 percent
lower than originally budgeted, personal income tax collections missed states' targets by 12.8 percent,
and corporate income taxes were a staggering 21.5 percent lower than projected. Forty-one states
collected less revenue in fiscal 2002 than they had planned for in their budgets.
NGA supports legislation to help relieve states' budget pressure. The legislation, originally sponsored by
Senators Ben Nelson (D-Nebraska), Susan Collins (R-Maine), and John Rockefeller (D-West Virginia)
and passed by the Senate in July, would have provided $9 billion in fiscal relief to states through a
combination of social services block grants and increased federal Medicaid fimds. A scaled back $5
billion provision was included in the Medicare-giveback bill that was negotiated by Senators Charles
Grassley (R-Iowa) and Senator Max Baucus (D-Montana) but was never reported out of the Finance
Committee.
"The fiscal relief package is an effective means of minimizing Medicaid cuts and would help offset the
negative impacts of state budget cuts on the overall economy," scheppach noted.
It is also critical that the Congress appropriate $3.5 billion for first responders for homeland security as
well as to fund implementation of election reform legislation when the House and Senate return in
January.
Printed from the NGA web site.
Senate-Passed Ammendment on Fiscal Assistance:
$10 Billion Flexible Grant and $10 B'dlion Enhancing the Medicaid FMAP
(federal fiscal years; dollars in millions)
Flexible Grant FMAP 2003 FMAP 2004 Grand
State 8tat~ Local I/ Total ~ 2.95 Total HH 2.95 Total Total
Alabama $91,9 $62.3 $154.2 $0.0 $46.3 $46.3 $0.0 $69,0 $69,0 $269.5
Alaska 30.0 8.8 38.8 0.0 10.3 10.3 0.0 16.0 16.0 65.1
Arizona 106.0 71.9 177.9 0.0 62.3 62.3 0.0 109.3 109.3 349.6
Arkansas 55.3 37.4 92,7 0,0 33.5 33.5 0.0 52.5 52.5 178.7
Cal~fomia 700,1 474.4 1,174.4 201.4 424.4 625.8 0.0 674,2 674.2 2,474.4
Colorado 88;9 60.2 149.1 0.0 35.8 35.8 0.0 57.0 57.0 241.9
Cotmeetlc~t 70.4 47.7 118.1 0.0 52.2 52.2 0.0 83.1 83.1 253,4
Delaware 30.0 11.0 41.0 0.0 9.8 9.8 0.0 15.0 15,0 65.8
Dis~Sct of Columbia 30.0 8.0 38.0 0.0 17.1 17.1 0.0 26.6 26.6 81.6
Florida 330.3 223.8 554.2 0,0 157.1 157,1 0.0 248.4 248.4 959.6
Georgia 169.2 t14.6 283.9 0.0 92.4 92.4 1.0 147,3 148,3 524.6
Hawaii 30,0 17.0 47.0 0.0 11.5 11.5 0.0 18.7 18.7 77.2
Idaho 30.0 18,1 48,1 0.2 12.2 12A 33 I9.6 23.0 83.5
llliaols 256,7 173.9 430.6 0.0 126.0 126.0 0.0 223.2 223.2 779.8
Indiana 125.7 85.2 210.8 1.5 62.0 63.5 0,0 105.4 105,4 379.7
Iowa 60.5 41.0 101.5 0.0 32.6 32.6 0.0 53.4 53.4 187.4
Kansas 55.6 37.7 93.2 0,4 25.5 25.9 0.0 37.0 37.0 156.1
Kenrmcky 83.5 56.6 140.1 0,9 55.1 56.0 0.0 83.3 83.3 279.4
Louisiana 92.4 62.6 155.0 0.0 6I .0 61.0 0.0 96.6 96.6 312.6
Mchae 30.0 17.9 47.9 2.7 22.3 25.1 2.7 37.5 40.2 113.1
Maryland 109.5 74.2 t83.6 0.0 58.1 58.1 0.0 95.6 95.6 337.3
Massachusetts 131.2 88.9 220.1 0.0 129.4 129.4 0.0 205.1 205.1 554.7
Michigan 205.4 139.2 344.6 36.0 113.1 149.1 0.0 168.7 168.7 662.3
Mhmc~ota 101.7 68.9 170.6 0.0 73.7 73.7 0.0 121.5 121.5 365.8
Mis~isslpgi 58.8 39.8 98.6 0.0 43.0 43.0 0.0 71.3 71,3 212.9
Missouri 115.6 78.4 194.0 0,0 73.3 73.3 0.0 112.9 112,9 380.2
Montana 30.0 12.6 42.6 0.0 8,6 8.6 0.5 14.0 14.6 65,8
Nebraska 35.4 24.0 59.3 0.2 193 19.5 0.0 31.0 31.0 109.8
Nevada 41.3 28.0 693 0,0 14.1 14.1 0.0 23.0 23.0 106.4
New Hampshire 30.0 173 473 0.0 12.5 12.5 0.0 21,3 21.3 81.1
New Jezsey 173,9 117.8 291.8 0.0 106.4 106A 0.0 169.4 169.4 567.6
New Mexico 37.6 25.5 63.1 0.0 28.1 28.1 0.0 46.3 46.3 137.4
New York 392.2 265.8 658.0 0.0 568.4 568A 0.0 952.1 952.1 2,178.5
North Carolina 166.4 112.7 279.1 0.0 102.4 102A 0.0 176,8 176,8 558.4
North Dakota 30,0 9.0 39.0 3.5 6.8 10.3 0.2 10.7 10,9 60.2
Ohio 234.7 159.0 393.7 0.0 147.4 147A 0.0 238.3 238,3 779.4
Oklahoma 71.3 48.3 119.6 0.0 37.6 37.6 6.2 57.4 63.6 220.9
Oregon 70.7 47.9 118.6 0.0 41.9 41.9 0.0 59.4 59.4 220.0
Pennsylvania 253.8 172.0 425,8 0.0 185.3 185.3 0.0 298.7 298.7 909.8
Riaoda Island 30.0 t4.7 44.7 0.0 20.0 20.0 0.0 31.9 31.9 96,5
Sout~ Carollna 82.9 56.2 139.1 0.0 46.9 46,9 0.0 73.4 73.4 259,4
South Dakota 30,0 t0,6 40.6 1.7 7.9 9.6 0,0 12.1 12.1 62.3
Termessee 117.6 79.7 197,3 0.0 87.1 87.1 8.7 135.3 144.0 428.4
Texas 431.0 292.0 723.0 12.7 207.7 220.4 0.0 351.0 351.0 1,294.4
Utah 46.2 31.3 77.4 0.0 15.6 15.6 0,0 26.1 26. t 119.2
Vermont 30.0 8.5 38.5 2,2 I0.0 12.1 5.6 15.4 20.9 71.6
Virginia 1463 99.1 245.4 16.8 54.0 70.9 15.9 88.6 104.6 420.8
Washington 121.8 82.5 204.4 9.1 72.2 81.2 0.0 119.7 119.7 405.3
West Virginia 37.4 25.3 62.7 1.9 24.1 26.0 0.0 37,5 37.5 126.2
Wiscon~m 110.9 75.1 t86.0 3.2 67.0 70.1 0.7 99,4 100,0 356:2
Wyoming 30,0 6,9 36,9 1.0 4.6 5,7 3.9 7.3 l 1 ~. 53,8
Puerto Rico 6.0 53.3 59.3 0.0 4.9 4.9 0.0 4.9 4.9 69,1
Territories 24.0 5.5 29.5 0.0 0.5 0.5 0.0 0.5 0.5 30.5
$10 Billion Flexible Grant and $10 Billion Enhancing the Medicaid FMAP
(federal fiscal years~ dollar's in millions)