As federal leaders negotiate a compromise to avoid the tax increases and sequestration cuts set to take effect in January, state legislators from across the country met with Obama administration officials Thursday to stress the importance of avoiding the so-called "fiscal cliff" and make their case for programs they want to protect.
About 10 state lawmakers met with officials from the White House Office of Management and Budget, as well as Aviva Aron-Dine, special assistant to the president for economic policy, and David Agnew, head of the White House's intergovernmental affairs office.
The state legislators are in Washington as part of the winter meeting of the National Conference of State Legislatures (NCSL), a bipartisan organization representing state lawmakers nationwide.
Their concerns about the fiscal cliff come at a time when states are just starting to bounce back from the recession. States are projected, in the aggregate, to finally return to their pre-recession revenue levels at the end of FY 2013 for the first time. A survey of state budget officials revealed that the majority of them have a "stable" economic outlook, according to NCSL's Arturo Perez, who leads the organization's fiscal program.
William Pound, executive director of NCSL, said the goal of the meeting was to underscore how federal actions would impact states.
Pound said lawmakers emphasized their desire to avoid any unfunded mandates as part of a deficit-reduction deal. They also highlighted the importance of maintaining steady federal funding for Medicaid, a joint state-federal program. While Medicaid is exempt from any automatic cuts that occur if lawmakers fail to negotiate a deal, the bigger concern for state lawmakers is how Medicaid funding would be impacted by a compromise. State officials worry that in an effort to reduce the deficit, Washington lawmakers could negotiate a deal that shifts Medicaid costs to states.
State lawmakers also emphasized their desire to see the Main Street Fairness Act, which would allow states to tax online purchases, become law either as part of the fiscal cliff negotiations or on its own. Such a move would be a boon as state revenues.
During the meeting, they also brought up an issue that's been gaining attention from both state and local leaders: the tax-exempt status of municipal bonds. State officials believe federal lawmakers may try to reduce the size of that exemption as a way of generating revenue and reducing the federal deficit. But such a move would also likely increase the costs of borrowing money for state and local infrastructure projects.
Yesterday, state lawmakers made similar pitches to Congressional leaders.