State Net Capitol Journal – February 18, 2013

State Net Capitol Journal – February 18, 2013

Budget & Taxes

STILL NO SEQUESTER DEAL IN SIGHT: In his State of the Union address last week, President Obama said both Democrats and Republicans agree that the $1.2 trillion in across-the-board spending cuts known as the sequester "are a really bad idea." But Democrats and Republicans in Congress are nowhere near an agreement to keep those cuts from taking effect on March 1.

"It's pretty clear to me that the sequester's going to go into effect," said Senate Minority Leader Mitch McConnell (R-Kentucky).

He said there was "an eerie similarity previous occurrences."

"Take no action, go right up to the deadline, and have an 11th-hour negotiation. Read my lips: I'm not interested in an 11th-hour negotiation."

That attitude is galling to Democrats working on a plan - which would reportedly raise taxes on the nation's highest earners and bar companies from deducting the cost of moving jobs out of the country - to delay the sequester for 10 months.

U.S. Senate Majority Leader Harry Reid (D-Nevada) said Republicans "seem content to sit on the sidelines" and allow the automatic spending cuts to take effect "without closing a single tax loophole or asking millionaires to contribute a single penny."

But U.S. Rep. Tom Cole (R-Oklahoma) said he understands the frustration of his party's leadership, having previously agreed to delay the cuts more than once.

"We've done it twice already," he said.

And U.S. Sen. Orrin Hatch (R-Utah) said the Democrats' push for new revenue wasn't "going to fly" with Republicans in either chamber, who have said repeatedly they won't accept any deficit-reduction proposal that includes new revenue, after agreeing to raise tax rates on top earners as part of a deal in January.

"It's posturing," Hatch said of the Democrats' plan. They're attempting to look like they're trying to do something when they actually know their plan is "dead on arrival," he said.

Republicans are being pressured, however, by the military, with about half of the sequestration cuts aimed squarely at defense spending. The Defense Department has said the cuts could leave it with insufficient funding to pay for its health-care system for military personnel, known as Tricare, as well as threaten the war readiness of all branches of the armed services.

"These devastating events are no longer distant problems," Deputy Defense Secretary Ashton Carter told the Senate Armed Services Committee last week. "The wolf is at the door."

U.S. Senator Kelly Ayotte (R-New Hampshire), for one, seems to fully appreciate the urgency of the situation. She is pushing to delay the sequester until the end of September by freezing congressional pay and cutting the federal workforce through attrition.

"There are other proposals that could be brought forward that are all spending cuts," she said. (BLOOMBERG, STATE NET)

GOV'S BUSINESS TAX CUT NO SURE THING IN FL: Florida Gov. Rick Scott's (R) top legislative priority this year is a $141 million tax cut for manufacturers.

"We need to build up manufacturing jobs in the great state of Florida," he said when he unveiled his $74.2 billion budget plan last month.

Up until last November, turning such a proposal into law might not have been too difficult for Scott, given that his party held supermajorities in both legislative chambers. But as a result of the 2012 elections, he'll now need Democratic votes in both the 40-member Senate, where Republicans hold a 26-14 majority, and the 120-member House, where the GOP's majority is 76-44, to get the 27 votes and 80 votes needed, respectively, for passage of his plan.

The prospects of that don't seem too encouraging, judging from the remarks of Rep. Perry Thurston (D), Minority Leader of the House.

"I doubt that'll be able to get a supermajority," he said. "It's just another [business] incentive. We don't know if it works."

There's no guarantee Scott will even get every Republican vote, particularly in the Senate where lawmakers tend to be more independent. (MIAMI HERALD, STATE NET, NATIONAL CONFERENCE OF STATE LEGISLATURES)

PENSION PROBLEMS NOTHING NEW TO IL: Illinois' $97 billion unfunded pension liability - among the largest in the nation - was apparently decades in the making.

"Of principle concern to the Commission is the accumulation of large unfunded accrued liabilities resulting for the most part from the inadequacy of government contributions in prior years to meet increases in costs due to the upward trend in salary rates and large additions to the membership of the funds," the Illinois Public Employees Pension Laws Commission stated in a report to then-Gov. William Stratton - in 1959.

A letter from the State Universities Retirement System to delegates of the state's 1970 Constitutional Convention indicated the state's public employee pensions were already running a debt in 1946 and that lawmakers had failed to take action to keep the pension system from falling further into the red.

"Despite this legislative mandate for stabilization of the past service liabilities, the General Assembly refused to appropriate the necessary funds to meet this requirement during the 1969 and 1970 legislative sessions," the letter said.

Laurence Msall, president of the Civic Federation of Chicago, summed up the matter simply.

"What has happened is a culture and a willingness by past governors and General Assemblies to take a very short-term perspective on the costs of underfunding the pension systems," he said. "It was easier to underfund pensions than not fund other programs." (STATE JOURNAL-REGISTER [SPRINGFIELD])

BUDGETS IN BRIEF: GEORGIA Gov. Nathan Deal (R) signed a measure, SB 24, that will require hospitals to pay the state 1.45 percent of their net patient revenue. The so-called "bed tax" will help the state close a $700 million hole in its current health care budget but will reportedly not be nearly enough to cover the health care needs of the state's growing population over the next two years (ATLANTA JOURNAL-CONSTITUTION, STATE NET). • Officials in Jefferson County, ALABAMA approved a "plan support agreement" with Dublin-based Depfa Bank PLC that could be a first step toward a plan for the county to exit Chapter 9 bankruptcy. The county's governing commission voted over a year ago to file the then-largest municipal bankruptcy in U.S. history (AL.COM, BIRMINGHAM NEWS). • OHIO Gov. John Kasich (R) has proposed broadening the state's sales tax to include 82 currently untaxed services, including admission to sports and cultural events. The sales-tax expansion would generate an estimated $4.5 billion in additional revenue (CINCINNATI.COM, STATE NET). • Twenty-eight members of WASHINGTON's House have signed on to a bill that would direct as much as $182 million a year of the state's new marijuana tax revenue - courtesy of voter-approved Initiative 502 - toward expansion of the state's publicly funded preschool program for the needy. Supporters of the measure, HB 1723, cited research from the University of North Carolina at Chapel Hill indicating that poor children who attend preschool are less likely to use marijuana than those who don't (NEWS TRIBUNE [TACOMA], STATE NET). • NORTH CAROLINA's Republican-controlled Legislature approved deep cuts to jobless benefits last week, despite their state's having the fifth-highest unemployment rate in the nation, at 9.2 percent. Gov. Pat McCrory (R) is expected to sign the legislation, which would make the state the eighth to roll back jobless benefits under the fiscal pressure of the recession (NEW YORK TIMES). • The economic and population growth in NORTH DAKOTA that fueled a $1.6 billion state surplus appears to be leveling off. The state's Office of Management and Budget reported last week that the state will see about $45 million less in revenues in the 2013-15 biennium than was originally forecast (FORUM OF FARGO-MOORHEAD).

- Compiled by KOREY CLARK

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