This from the Wall Street Journal:
Remember how $200 billion in federal stimulus cash was supposed to save the states from fiscal calamity? Well, hold on to your paychecks, because a big story of 2010 will be how all that free money has set the states up for an even bigger mess this year and into the future. [...]The article notes that a couple governors, such as Indiana's Mitch Daniels, had the common sense -- er, foresight -- to refuse stimulus funds. "One of the smartest decisions we made," said Gov. Daniels about that refusal.
First, in most state capitals the stimulus enticed state lawmakers to spend on new programs rather than adjusting to lean times. They added health and welfare benefits and child care programs. Now they have to pay for those additions with their own state's money. [...]
Second, stimulus dollars came with strings attached that are now causing enormous budget headaches. [...]
Worst of all, at the behest of the public employee unions, Congress imposed "maintenance of effort" spending requirements on states. These federal laws prohibit state legislatures from cutting spending on 15 programs, from road building to welfare, if the state took even a dollar of stimulus cash for these purposes.
One provision prohibits states from cutting Medicaid benefits or eligibility below levels in effect on July 1, 2008. That date, not coincidentally, was the peak of the last economic cycle when states were awash in revenue. State spending soared at a nearly 8% annual rate from 2004-2008, far faster than inflation and population growth, and liberals want to keep funding at that level. [...]It's bad enough that Congress can't balance its own budget, but now it is making it nearly impossible for states to balance theirs. [...]
So when states should be reducing outlays to match a new normal of lower revenue collections, federal stimulus rules mean many states will have little choice but to raise taxes to meet their constitutional balanced budget requirements. Thank you, Nancy Pelosi.
But how long can states like Indiana and Texas (which also refused stimulus funds) hold out against a federal government intent on assimilating them into The Collective?