Minnesotans will hear today what many Americans have already been told: the recession is taking a huge bite out of state government operating revenues. Today's deficit projection will put a cloud over the future of every state government activity — education, public safety, care for the elderly and disadvantaged, environmental and public health protection and all the rest.
Minnesota is by no means alone in this predicament. At least 41 of the 50 states have been similarly afflicted. Many of them have begun to cut spending on the very things — education and health care — that build the human capital that states need to strengthen their economies in the long term.
That's why economists and governors of both parties are calling on Congress and President-elect Barack Obama to ease the states' pain. In October, the bipartisan leaders of the National Governors Association asked Congress to boost the federal share of Medicaid funding, easing a burden that swells when unemployment rises.
This week, the governors' group and the National Conference of State Legislatures jointly asked for federal help with rising Medicaid and unemployment insurance costs, and for a quick infusion of funds for state road, transit, wastewater and building projects. That strategy would not only put jobless people to work, but also would make lasting improvements to the infrastructure on which the economy relies.
The case for federal assistance to state governments is strong, and pressing. Moody's economist Mark Zandi, an adviser to GOP presidential candidate John McCain, told a Senate committee two weeks ago that "extending unemployment insurance benefits, food stamps and aid to state government would be the most effective spurs to economic growth."
That's why it was surprising that Gov. Tim Pawlenty, who pushed for such help last January as head of the National Governors Association, was cool to the idea Tuesday after meeting with Obama and his fellow governors.
Echoing two other Republican governors, South Carolina's Mark Sanford and Texas' Rick Perry, Pawlenty resisted the idea of federal aid to the states for the sake of economic stimulus. The rapid increase in the federal deficit in recent weeks is "gravely concerning," he said.
He further suggested that Minnesota ought to say no to additional Medicaid money, if its acceptance would prevent eligibility cuts in the program. "We cannot have our hands tied so tightly that we duck necessary reforms," Pawlenty said.
