With their states on the brink of financial catastrophe, governors pleaded yesterday for the divided federal government to avoid doing anything that would hamper the tenuous economic recovery.
Their message to Washington: prevent a government shutdown, abstain from spending cuts that dramatically will affect states, and end even preliminary discussions about allowing states to declare bankruptcy.
“Anything that Congress does that will undermine our recovery is quite troublesome to us,’’ said Governor Christine Gregoire of Washington, head of the National Governors Association, as she opened the group’s winter meeting. “We’re asking for cooperation.’’
“We don’t need a hiccup now in our recovery,’’ she added. “We are fragile.’’
States have made $75 billion in budget cuts and raised taxes by $33 billion over the past two years to make up for budget shortfalls. Governors drained reserve cash funds and oversaw several rounds of severe budget cuts, so much so that Republicans and Democrats alike now are focused on how to completely remake state governments.
The overall economic situation in states is improving, but slowly. “Recovering, not recovered,’’ as Governor Deval Patrick of Massachusetts put it.
High unemployment persists. Even more dire budget situations are to come.
Over the next 2 1/2 years, states face an estimated $175 billion more in budget gaps that they have no choice but to fill. The hole is caused partly because an initial infusion of cash from President Obama’s economic stimulus law, as well as extensions of that money, will dry up in June. States received $103 billion in Medicaid money and $48 billion in education dollars to soften the recession’s blow.
The warnings come just as the Commerce Department reported that state and local responses to the fiscal crisis were undercutting the national recovery, slowing economic growth. Governors said the report only proved their point.
“For two years, governors have said when we cut we impact the recovery,’’ said Gregoire. “We know we have to make the cuts, but we can ill afford to have Congress on top of that cutting us more because the result will slow the recovery in our home states and in the nation.’’
The current budget expires Friday. That means lawmakers must OK a new spending plan before the March 4 deadline to keep much of the government from running out of money and closing.
Lawmakers appear to be moving closer to a compromise that would prevent a government shutdown, but the Republican-run House and the Democratic-controlled Senate are still bickering over how much to cut.
House Republicans detailed a proposal Friday to cut $4 billion in federal spending as part of legislation to keep the government operating for two weeks past the deadline. They urged Senate Democrats to accept their approach and avoid a shutdown.
The GOP plan, to be debated by the House on Tuesday, includes $1.24 billion in savings, mainly from programs that Obama had proposed cutting in the fiscal 2012 budget, and the termination of some $2.7 billion in earmarks, or special projects, that are part of this year’s budget.
“For the sake of our people and our economy, we cannot allow gridlock to prevail,’’ Obama said in his weekly radio and Internet address. “I urge and expect them to find common ground so we can accelerate, not impede, economic growth.’’
Democrats want a short-term extension at current spending levels so the parties can negotiate over how deeply to cut expenditures and begin chipping away at the deficit and the trillions of dollars in accumulated debt.
But House Speaker John Boehner, Republican of Ohio, insists that a short-term bill without spending cuts is unacceptable.
Democrats have also rejected as draconian a bill the House passed last week to fund government operations through Sept. 30, the end of the budget year, while slashing spending by $61 billion. Obama has threatened to veto that bill.
In the weekly Republican message, freshman Senator Rob Portman of Ohio criticized Obama’s 2012 budget plan for proposing no changes to entitlement programs, such as Medicare and Medicaid, which are huge contributors to overall government spending.