PROVIDING STATES WITH FISCAL RELIEF

Our economy was already struggling when the attacks of September 11 took place, but the added cost of protecting our homeland, lingering unemployment, and uncertainty regarding war and further terrorist strikes placed further tremendous and unanticipated strains on state budgets across the country. State governments are crucial partners with the federal government in providing health care, education, and other essential services to Americans. Today, however, they are facing a dramatic and unexpected decline in revenues at precisely the time when the demand for government services is increasing. Maine – like so many other states – is facing its most serious budget shortfall in 50 years. Across the country, states face deficits totaling between $70 and $85 billion for the next fiscal year, which begins in most states on July 1, and they also face remaining deficits of $26 billion for the current fiscal year. At one point, the projected shortfall in Maine reached as high as $1.2 billion – roughly 20 percent of our state's overall budget of $5.3 billion. While the Governor and legislators have taken action to bring that number down, Maine still faces extremely challenging budget difficulties.

With the exception of Vermont, every state in America must balance its budget every year. Unlike the federal government, states cannot print more money, run temporary deficits, or borrow money to close deficits. As a consequence, states have been cutting spending, increasing taxes, delaying important building projects, and doing whatever else they can because they must stay in the black.

States have been forced to cut vital programs, including those providing lifelines to our most vulnerable citizens. Medicaid, for example, provides a critical health care safety net for 44 million of our most vulnerable low-income citizens, including 218,000 in Maine. Forty-nine states have nonetheless cut their Medicaid Programs or are planning to do so, even as the number of people without health insurance continues to climb. As a consequence, approximately 1.7 million Americans are at risk of losing their health insurance and being forced to join the 41 million Americans who already go without coverage.

In order to address this growing nationwide problem, I led the fight in the Senate to send $20 billion in aid to state governments, $10 billion of which is directed to the Medicaid program. After a lot of advocacy to persuade my colleagues, my bipartisan state aid amendment was added to the economic growth package by an overwhelming margin and will soon become law. Under my provision, Maine will receive a total of $115.6 million over the next two years, including $65.6 million in Medicaid funding and another $50 million in a flexible grant that can be used for priorities such as education, job training, homeland security, or unfunded federal mandates.

Aid to states is important, not simply because it will help the most vulnerable Americans, but also because it makes good economic sense. Putting money into the hands of states is a great way to stimulate economic growth in conjunction with the tax relief Congress approved. It certainly doesn't do any good to reduce taxes at the national level if states are resorting to tax increases at the same time.

The federal government is most effective when it stands arm-in-arm – and not toe-to-toe – with its partners, the states. The growing fiscal crisis state governments are confronting threatens the well-being of many of our neediest citizens and neighbors. I am confident the bipartisan provision I crafted will provide important assistance for our most vulnerable citizens and help energize our listless economy.