Koffler, Keith, White, Jason, Becker, Christine, Peters, Katherine McIntire, Gruber, Amelia, The Journal of Government Financial Management
White House Forecasts Record Deficit of $455 Billion This Year-In July, the White House predicted lasting deficits that will spike up into record territory this year, reaching $455 billion in fiscal 2003 and $475 billion during fiscal 2004.
Just months ago, in its February fiscal 2004 budget document, the administration forecast deficits at least $150 billion less-$304 billion in fiscal 2003 and $307 billion in fiscal 2004. The newforecasts are contained in the annual OMB midsession review.
The review forecasts that deficits will drop steeply after fiscal 2004, but still be far from eliminated. The deficit in fiscal 2005 falls by $171 billion to $304 billion, and then reaches $238 billion in fiscal 2006 and $213 billion in fiscal 2007. But the shortfall increases a bit in fiscal 2008 to $226 billion. From fiscal 2004 to fiscal 2008, the country will add another $1.455 trillion in debt, the review stated. The figures do not include anticipated additional spending needs for U.S. actions in Iraq, which will be counted as part of fiscal 2004 spending. The forecasts also include an assumption that a prescription drug benefit is added to Medicare at a cost of $400 billion over 10 years, which Congress has not yet passed. By: Keith Koffler, CongressDaily.
States Cautiously Project Recovery-The Rockefeller Institute of Government has released its eighth annual survey of the economic assumptions underlying state budgets. The survey, State Budgetary Assumptions in 2003-States Cautiously Projecting Recovery, reports that states are expecting a slightly stronger economy in 2003 and nearfull recovery by 2004. They also project slowing growth in Medicaid and other caseloads. Read more at www.rockinst.org.
Governors Voice Appreciation for Passage of State Fiscal Relief Measure-In May, the nation's governors said they very much appreciated that Congress and the President have agreed to $20 billion in state fiscal relief as part of the Jobs and Growth Tax Relief Reconciliation Act of 2003. Governors believe that these funds would help close the gap in their current fiscal challenges and prevent the loss of vital services and enhance their mutual commitment to a strong state-federal partnership.
"The nation's governors are particularly grateful to those individual members of Congress who have worked so hard with us over the past two years to secure this much-needed relief," said NGA Chairman Governor Paul E. Patton of Kentucky.
NGA Vice Chairman Governor Dirk Kempthorne of Idaho said, "Governors appreciate that the administration and Congress recognize the importance of the fiscal condition of the states. These monies will help governors continue to provide essential and critical services to our citizens."
Source: National Governors Association at www.nga.org.
State Revenues Hit By Bush Tax Bill-Despite doling out $20 billion in fiscal aid to state governments, President Bush's $350 billion tax cut bill will drive down total state tax collections by at least $1 billion and as much as $3 billion over the next two years, dampening the bill's positive impact on state coffers, analysts say. That's because nearly every state piggybacks portions of its tax code on the federal code to ease the tax-filing burden on individuals and businesses. As a result, the package of tax cuts Bush signed May 28 will force corresponding tax cuts in many states, barring state action to decouple from the federal tax code. Viewed in the context of total state general fund spending, which exceeds $500 billion a year, the billion dollar-plus revenue loss from the federal tax bill is not huge. But with many states facing the tightest budgets they've seen in a generation and lawmakers balancing teacher layoffs against cutting road construction against raising taxes, some state officials would have preferred to avoid even this small loss. "The federal government made tax cuts that because we're tied to the federal tax system actually hurt us. …