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Obama, governors to meet as states face cutoff of funds

With stimulus money running out and Congress proposing new cuts, the nation's governors fear the effect on their states' fragile finances.

February 28, 2011|By Paul West, Washington Bureau

Reporting from Washington —  

President Obama and the nation's governors will meet Monday at the White House amid worries by state executives that Washington's budget battles could damage a fragile U.S. economic recovery.

Financially strapped state governments are heading off a cliff this year when more than $150 billion in federal stimulus money runs out, said Washington Gov. Chris Gregoire, chairman of the National Governors Assn. States have used most of the money to keep teachers on the job, fund healthcare for the poor and balance their budgets over the last two years.

"We don't need a hiccup right now in our recovery," said Gregoire, a Democrat. Governors around the country are struggling to close budget gaps in the aftermath of the recession, and new spending cuts by Congress that directly affect states "will slow the recovery of the nation," she said.

Lingering fears of a government shutdown were clearly on governors' minds as they gathered over the weekend for the governors association's annual winter meeting. Congress is considering a proposal to postpone Friday's shutdown deadline by two weeks, but lawmakers still must resolve vast differences over spending levels for the second half of the fiscal year.

A federal government shutdown "will definitely impact every state," said Arkansas Gov. Mike Beebe, a Democrat.

But at least one of the 29 new governors elected last fall, Maine's Paul LePage, said he was not worried at all. If the federal government shuts down, "you're not sending money to the states, the federal government's not taking on more debt. Because every penny they're spending is debt," said the Republican, who won with "tea party" backing. "I don't believe that you can print counterfeit money to pay your bills."

Governors of both parties have proposed cuts in healthcare, one of the largest single expenses for states, as they struggle to balance their budgets. Many, including some Democrats, want the Obama administration to loosen a requirement in the new healthcare law that prevents them from dropping large numbers of low-income people from Medicaid. About 53 million poor children and adults are covered by the program, which is funded jointly by the state and federal governments.

Gov. Rick Scott of Florida, a former healthcare executive, and other Republican governors want the federal government to funnel healthcare assistance to the states through block grants, without strings attached, so governors can spend the money as they see fit. "I won't get reelected" if the state fails to provide adequate care while lowering medical costs at the same time, Scott said.

States "need to have the flexibility" to lower the costs of Medicaid, said Republican Gov. Scott Walker of Wisconsin, whose fight with public employee unions has sparked a national debate over labor's role. Walker addressed his colleagues by video link from Madison, the state capital.

The Obama administration is trying to balance demands of cash-starved states with the need to protect key elements of the new healthcare law. Starting in 2014, Medicaid programs will be instrumental to the law's guarantee of coverage for most Americans.

Reflecting the new budget reality in Washington, Gov. John Hickenlooper of Colorado said "most governors recognize that the federal government can't write checks — but they can make loans." For example, the Democrat suggested, federal financial assistance could be provided for one of his pet ideas: a network of compressed-natural-gas stations along interstate highways, designed to encourage use of the cleaner-burning fuel by trucking companies and private individuals.

Pennsylvania Gov. Tom Corbett agreed that it was not "realistic to expect more money at this point" from Washington. The Republican, whose state faces a $4-billion budget gap, said he feared a wave of new Obama administration environmental policies aimed at coal mining and deep drilling for natural gas, which he said would hinder the recovery by preventing job growth in his state and others.

Wisconsin's Walker was not the only governor to skip the meeting. The executives of the nation's largest states, Democratic Govs. Jerry Brown of California and Andrew Cuomo of New York, were also absent. Brown cited pressing budget issues in California.

Prior to the meeting with Obama and members of his Cabinet, the governors and their spouses were invited to a black-tie White House dinner Sunday night featuring entertainment by singer Gladys Knight.

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