WASHINGTON — As congressional conferees struggle with negotiating a budget resolution, the nation’s governors want more certainty about the federal budget and the amount of funds states will receive as well as more flexibility on how to spend that money, National Governors Association officials said.
“No matter what the outcome, more discretion under discretionary spending would be a great thing,” NGA executive director Dan Crippen told reporters Wednesday, adding, “The ability to adjust programs to meet state requirements, to meet state realities, would be a great thing.”
House Speaker John Boehner, R-Ohio, told reporters Thursday that if House and Senate budget conferees fail to reach a compromise on a budget resolution by Jan. 15 when the current continuing resolution expires, the House will be ready to vote on another CR containing Budget Control Act funding levels.
The BCA of 2011 established caps on federal discretionary spending through fiscal 2021, and if congressional appropriations do not stay within those limits, across-the-board spending cuts occur. The continuing appropriations act that expires on Jan. 15 has defense discretionary spending at an amount greater than the cap for fiscal 2014 and non-defense discretionary spending at an amount below the cap, NGA deputy director Barry Anderson said.
Republicans want to increase the amount of defense discretionary spending and Democrats want to increase the amount of non-defense discretionary spending. A lot of non-defense discretionary spending consists of grants to states, and it is possible that Congress will find a way to increase both types of spending while also offsetting the increases, Anderson said.
But what is of utmost importance for governors is for Congress to put something in place so that the governors can plan, Anderson said. Governors, currently working on their budget proposals and drafting their state of the state speeches, and will be mostly done with them by Jan. 15, Crippen said.
The NGA continues to be guided by four principles concerning deficit reduction, that: reforms be designed to produce savings for both the federal government and states; deficit reduction isn’t achieved by shifting costs to states or imposing unfunded mandates; states have increased flexibility so they can be more efficient; and Congress not impose maintenance-of-effort provisions on states as a condition of funding.
In addition to seeking more certainty and flexibility over federal funds, governors also want the online sales tax bill called the Marketplace Fairness Act to be enacted. NGA officials said they expect the act to pass the House soon. NGA deputy director of policy David Quam said he thinks it’s a good sign that House Judiciary Committee Chairman Bob Goodlatte released principles about what he wants in a bill, rather than completely deciding against moving forward with online sales tax legislation. He also thinks there will be a hearing on this topic soon.
The Senate passed its version of the bill in the spring, and Quam said that he was encouraged by the large size of the majority of senators voting in favor of the bill.
“The discussions we’ve had, even in the House among members, and this is a sea change, they understand the issue,” Quam said. “They understand that this is now about jobs on Main Street.”
If the Marketplace Fairness Act becomes law, states may reduce their taxes. Some states have set income-tax rate reduction goals, and states don’t want to have higher taxes than neighboring states, Crippen said.
“It’s hard to cut rates, but states are still interested in doing that,” he said.
The NGA recently released a report about the costs of curbs or elimination to the tax exemption for municipal bonds and the deduction for state and local governments. The group is monitoring whether there will be additional action taken on tax reform before the year’s end, said NGA general counsel and staff director David Parkhurst.
States are collecting more in general funds since the recession, but federal contributions to states are declining. The chance that federal contributions will increase are minimal, Crippen said. He does not believe that Congress will raise the federal gas tax soon, and since gas-tax revenue is falling, less federal money is going to states for transportation infrastructure. As a result, states will have to be more responsible for funding projects and are raising their own gas taxes or are looking at innovative financing methods, Crippen said.