WASHINGTON — The National Association of State Treasurers sent a letter to President Obama and congressional leaders urging them to come to a bipartisan, balanced agreement to address the looming “fiscal cliff” and federal budget crisis.
“As state treasurers, we have sought to maintain prudent fiscal policies in the face of a debilitating recession, and as such, we would like to applaud you for recognizing that the federal government needs to address its budget deficit and for your bipartisan agreement on the need to avoid sequestration,” wrote Kate Marshall, Nevada State Treasurer and NAST president.
The letter comes at a time when congressional leaders and the White House are at loggerheads over addressing the fiscal cliff — the combined set of hikes in income tax rates and across-the-board sequestration spending cuts slated to take effect after the end of this year.
On Monday, House Republicans made a new deficit reduction offer to the White House that calls for $800 billion in increased tax revenues and would cut the deficit by $2.2 trillion over the next decade. It would also cut spending by $1.2 trillion.
The NAST letter highlighted that state and local governments shoulder the majority of domestic government functions. State and local governments fund 90% of the cost of K-12 education and finance almost 75% of the cost of all public infrastructure such as roads and clean water, the treasurers wrote.
While state and local governments spend upwards of $2.5 trillion annually, most municipalities are still struggling to recover from the recession due to declining revenues and balanced budget requirements.
“The failure to address the fiscal cliff ... will further aggravate the precarious situation we are in and risk pushing us back into a recession,” Marshall wrote. “This is due in part to the weighted effect such cuts in federal funding will have on states and local governments in education, law enforcement, health care and other priorities.”
NAST said that sequestration, the $1.2 trillion of automatic across-the-board spending cuts that are to go into effect in January, threatens to derail economic growth and cutting the federal budget “by simply shifting the total costs of these essential programs to the states will not facilitate a robust economy.”
NAST argued that shifting the burden of federal programs to state and local governments without fundamental reform, “does not represent real cost savings.”