[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
WHY FEDERAL INVESTMENTS MATTER:
STABILITY FROM CONGRESS TO STATE CAPITALS
=======================================================================
HEARING
before the
COMMITTEE ON THE BUDGET
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
__________
HEARING HELD IN WASHINGTON, D.C., JANUARY 15, 2020
__________
Serial No. 116-19
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Printed for the use of the Committee on the Budget
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available on the Internet:
www.govinfo.gov
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U.S. GOVERNMENT PUBLISHING OFFICE
40-597 WASHINGTON : 2020
COMMITTEE ON THE BUDGET
JOHN A. YARMUTH, Kentucky, Chairman
SETH MOULTON, Massachusetts, STEVE WOMACK, Arkansas,
Vice Chairman Ranking Member
HAKEEM S. JEFFRIES, New York ROB WOODALL, Georgia
BRIAN HIGGINS, New York BILL JOHNSON, Ohio,
BRENDAN F. BOYLE, Pennsylvania Vice Ranking Member
RO KHANNA, California JASON SMITH, Missouri
ROSA L. DELAURO, Connecticut BILL FLORES, Texas
LLOYD DOGGETT, Texas GEORGE HOLDING, North Carolina
DAVID E. PRICE, North Carolina CHRIS STEWART, Utah
JANICE D. SCHAKOWSKY, Illinois RALPH NORMAN, South Carolina
DANIEL T. KILDEE, Michigan KEVIN HERN, Oklahoma
JIMMY PANETTA, California CHIP ROY, Texas
JOSEPH D. MORELLE, New York DANIEL MEUSER, Pennsylvania
STEVEN HORSFORD, Nevada DAN CRENSHAW, Texas
ROBERT C. ``BOBBY'' SCOTT, Virginia TIM BURCHETT, Tennessee
SHEILA JACKSON LEE, Texas
BARBARA LEE, California
PRAMILA JAYAPAL, Washington
ILHAN OMAR, Minnesota
ALBIO SIRES, New Jersey
SCOTT H. PETERS, California
JIM COOPER, Tennessee
Professional Staff
Ellen Balis, Staff Director
Becky Relic, Minority Staff Director
CONTENTS
Page
Hearing held in Washington D.C., January 15, 2020................ 1
Hon. John A. Yarmuth, Chairman, Committee on the Budget...... 1
Prepared statement of.................................... 5
Letter submitted for the record.......................... 8
Hon. Steve Womack, Ranking Member, Committee on the Budget... 10
Prepared statement of.................................... 12
Tracy Gordon, Ph.D., Senior Fellow, Urban-Brookings Tax
Policy Center.............................................. 16
Prepared statement of.................................... 19
Jeanne Lambrew, Ph.D., Commissioner, Department of Health and
Human Services, State of Maine............................. 28
Prepared statement of.................................... 30
Hon. Mark Poloncarz, County Executive, Erie County, New York. 33
Prepared statement of.................................... 35
Hon. Larry Walther, Chief Fiscal Officer and Secretary,
Department of Finance and Administration, State of Arkansas 38
Prepared statement of.................................... 40
Kim Murnieks, Director, Office of Budget and Management,
State of Ohio.............................................. 47
Prepared statement of.................................... 49
Hon. Sheila Jackson Lee, Member, Committee on the Budget,
statement submitted for the record......................... 104
WHY FEDERAL INVESTMENTS MATTER:
STABILITY FROM CONGRESS TO STATE CAPITALS
----------
WEDNESDAY, JANUARY 15, 2020
House of Representatives,
Committee on the Budget,
Washington, DC.
The Committee met, pursuant to notice, at 10:02 a.m., in
room 210, Cannon House Office Building, Hon. John A. Yarmuth
[Chairman of the Committee] presiding.
Present: Representatives Yarmuth, Moulton, Higgins, Boyle,
Price, Schakowsky, Kildee, Panetta, Morelle, Horsford, Scott,
Jackson Lee, Lee, Jayapal, Sires, Peters, Cooper; Womack,
Woodall, Johnson, Smith, Flores, Norman, Hern, Roy, Meuser,
Crenshaw, and Burchett.
Chairman Yarmuth. It is possible that we will have votes
during the hearing, so I ask unanimous consent that the Chair
be authorized to declare a recess at any time.
Without objection, so ordered.
I want to welcome our witnesses here with us today. This
morning we will be hearing from Dr. Tracy Gordon, a senior
fellow with the Urban-Brookings Tax Policy Center; Dr. Jeanne
Lambrew, the commissioner of the Department of Health and Human
Services for the state of Maine.
I am going to yield to the gentleman from New York to
introduce our third witness.
Mr. Higgins, you want to introduce the witness?
Mr. Higgins. Mark Poloncarz is a county executive from Erie
County, a great, great county executive, a former youth hockey
coach, an aspiring musician--plays the guitar--and the son of a
steelworker and a nurse who worked at Mercy Hospital. Mark is a
native of Lackawanna, New York. He is a source of great pride
for all of us in western New York. He is a great leader with a
great vision, and I am pleased to have Mark Poloncarz here
today with us.
Chairman Yarmuth. Thanks. I now yield to the Ranking Member
to introduce another witness.
Mr. Womack. Well, very briefly, Mr. Chairman, thank you. It
is a delight to have the chief financial officer for the state
of Arkansas in our midst today, Secretary Larry Walther of out
of the Little Rock area.
Obviously, you know, before the restructuring of state
government that Governor Hutchinson most recently took care of,
he was a director of finance and administration. And there you
will have to help me. Secretary now of? OK, so just added
secretary to the list, and remarkable talent, and very
articulate, and I think will speak well to the connections, the
fiscal connections that we have between state and federal
funding. And we welcome Secretary Walther.
Chairman Yarmuth. Thank you. I now yield to the gentleman
from Ohio, Mr. Johnson, to introduce our final witness.
Mr. Johnson. Well, thank you, Mr. Chairman, and our Ranking
Member, my colleague from Arkansas, Mr. Womack, for giving me
this time, because this is really an honor for me, and a
pleasure and a privilege to welcome one of our witnesses here
today, Ms. Kimberly Murnieks.
She is the director of the Office of Budget and Management
for the state of Ohio. Director Murnieks has dedicated her life
to public service. And, as Ohio's budget director, she works
hard every day to ensure the state government operates
efficiently and effectively for all Ohioans. That is what we
should be doing here. She is doing it there, and that includes
the roughly 721,000 people that I represent.
It is great to have a Buckeye and a graduate of Marietta
College, which is right there in my neighborhood. I can throw a
rock and hit the president's house from my front yard.
[Laughter.]
Mr. Johnson. So, yes--well, he is a former Marine, so he
can dodge the--he is good at it.
But we are glad to have her here, testifying before the
House Budget Committee. I look forward, Director Murnieks, to
hear your testimony and to the testimony of each of our panel
members, because these issues are really important. I know they
don't get a lot of media play, but they are really important.
Thank you, Mr. Chairman. I will yield back.
Chairman Yarmuth. Absolutely. Thank you.
And just because it is unusual for us to have five
witnesses--so we, in this hearing, because we wanted as much
diversity as we could have when we are talking about state and
local governments, we decided to add another minority witness,
and I am glad you all are here.
With that, I will yield myself five minutes for an opening
statement.
Welcome back, everyone. I am looking forward to this new
year in the House Budget Committee, and I hope you are, as
well.
Last year, with the support of both Republican and
Democratic members of this Committee, Congress put in place
bipartisan budgets for 2020 and 2021, complete with
discretionary top lines and committee allocations, including
accommodations for initiatives that are fully offset.
The Committee held hearings addressing some of the biggest
economic issues facing our nation, including the benefits of
immigration reform, the cost of climate change and aging
infrastructure, the potential costs of debt, the federal
government's vital role in mitigating economic downturns, and
more.
The federal budget has a direct impact on Americans'
everyday lives, but it also affects the abilities of state and
local governments to operate and serve their constituents.
State and local governments touch the lives of nearly every
American and, in many cases, they have been on the forefront of
major policy innovation.
But the reality is many of these great advancements, like
Medicaid expansion, infrastructure revitalization, and
investments in our public schools, would not be possible
without critical support from the federal government. From
public parks to private--to public libraries, renewing a
driver's license, or driving kids to school, every day millions
of Americans interact with institutions and infrastructure made
possible with the help of federal investments.
The impact of federal funding across the country cannot be
overstated. On average, federal funding makes up nearly one-
third of a state's budget. As a result, federal funding
decisions, unpredictability, and, of course, national economic
downturns have a major impact on states and their budgeting,
and their plans for strategic investments.
The same is true for local governments. With many state
legislatures and city councils headed into session to plan for
the upcoming fiscal year, it is an important time to examine
the role of federal investments in our communities.
Most federal grants going to states are for Medicaid, which
provides insurance coverage to 65 million Americans, and allows
states to customize their programs to meet the specific needs
of their population. Under the Affordable Care Act, 37 states,
including the District of Columbia, have expanded Medicaid,
helping vulnerable Americans gain affordable and quality health
care coverage. Now Kansas is on deck to actually become the
38th.
In my home state of Kentucky, nearly a half-million people
obtained health coverage through Medicaid expansion. That is in
a state of just over 4 million. I wish the people of Kansas
similar success.
Federal support also keeps the doors open at many community
health centers and public health clinics, helping those
struggling with addiction and others trying to break free from
violent or abusive situations. Other federal investments that
Americans rely on every day include programs that help
Americans meet their basic needs; transportation projects to
construct highways, transit systems, and airports; and other
infrastructure investments that can revitalize communities and
encourage economic growth.
Meanwhile, education grants such as Title I are making sure
our schools are equipped to serve our nation's youth. Using
these investments, local officials can tailor programs to best
meet the unique needs of their communities.
These are vital programs. And while it may be easy for some
of our colleagues or others in the White House to look at a
dollar amount in a column on a page in the federal budget and
say, ``Yes, slash it,'' it is important to remember that cuts
carry serious consequences for states and localities and the
people we all serve. Most states and local governments operate
on the thinnest of margins, and would be unable to backfill any
major loss of federal funding. Their budgets would take a
massive hit, but it is the people, our constituents, who would
suffer most.
During economic downturns, the loss of federal support
would be especially harmful. In a recession, states face a one-
two punch of declining tax revenues and increasing demand for
services. Federal investments help states, most of which are
required to balance their budgets to avoid painful cuts and
still provide crucial services.
Between 2008 and 2012 the American Recovery and
Reinvestment Act and a later extension were responsible for
closing 24 percent of state budget gaps, as states nationwide
grappled with the lingering effects of the Great Recession.
Today the Committee will hear from witnesses who know
firsthand just how important federal investments are to state
and local budgets. I look forward to discussing with our
witnesses and my colleagues ideas that will help keep the
federal government--be an even better and more reliable partner
to state and local governments and the Americans they serve.
[The prepared statement of Chairman Yarmuth follows:]
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Chairman Yarmuth. And before I yield to the Ranking Member
for his opening statement, I would like to ask unanimous
consent to submit a letter from the American Federation of
State, County, and Municipal Employees.
Without objection, so ordered.
[The letter submitted by Chairman Yarmuth for the record
follows:]
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Chairman Yarmuth. With that I yield five minutes to the
Ranking Member, the gentleman from Arkansas, Mr. Womack.
Mr. Womack. I thank the Chairman for holding this hearing,
and welcome to each of our witnesses here today.
Late last year we heard firsthand from experts several
times right here in this room that our economy is historically
strong by numerous metrics, thanks to pro-growth policies
enacted under this Administration. A strong American economy
yields positive results for all of us. From the largest state's
government to the smallest local authority, everyone feels the
benefits of a good economy.
We are experiencing historic economic prosperity. A
recession is not imminent. Rather, the true threat to state and
local governments is the dire status of the federal
government's finances. The federal debt recently eclipsed $23
trillion, and annual deficits are projected to exceed a
trillion dollars each year over the next 10 years. We may be
facing a sovereign debt crisis which will affect every state,
regardless of size, and negatively impact every American.
When the federal government does provide support to state
and local governments, federal overreach often stifles
flexibility and innovation. Many well-intended federal
requirements hinder states' efforts to address domestic
priorities. Such requirements impose unfunded costs, hours of
additional paperwork, and prescriptive measures that prevent
state and local governments from tailoring programs to suit the
needs of their constituents.
Let me give you an example. In my home state of Arkansas,
the Department of Energy gave a company called Clean Line
Energy Partners a waiver to develop the plans in Eastern Clean
Line--Plains and Eastern Clean Line project after our state
rejected the proposal. For years, the Arkansas delegation
fought for our state's right to prior approval before an agency
exercises eminent domain. This was a high wire line that
Arkansas did not need and did not benefit from enough to
justify the amount of land and resources taken from Arkansans.
Thankfully, after multiple meetings and letters from the
Arkansas delegation, and under a new Presidential
administration, the Department of Energy terminated its
contract with Clean Line. This action effectively stripped
their waiver to circumvent local and state approval, placing
the authority where it belongs, with Arkansans.
Republican lawmakers have offered many proposals to promote
state flexibility in key domestic spending priorities, such as
implementing a Medicaid per capita allotment, or an optional
block grant, and dialing back burdensome infrastructure
regulations imposed by the National Environmental Policy Act of
1969.
The point is that state and local governments, along with
private-sector innovation, are best equipped to address
domestic needs. The federal government should focus on finding
more opportunities to stay out of its way.
The size and scope of the federal government have vastly
increased throughout our country's history. The power dynamic
between the federal government and state and local governments
has become greatly skewed, overly dominated by federal control,
and far out of line from what the founding fathers envisioned.
Today's hearing presents an opportunity for us to have a
serious conversation about the need to restore the principles
of federalism in the budget process. It is in the best interest
of all to promote policies that reduce the federal imprint on
state and local governments and encourage these institutions to
address an increasing number of our nation's domestic policy
concerns. One-size-fits-all policies from bureaucrats sitting
here in Washington do little to solve problems or address the
needs in Arkansas's Third congressional District or any other
location far outside the Beltway.
Today's hearing also provides us yet another opportunity to
discuss the fact that the current congressional budget process
isn't working. Congress has frequently relied on continuing
resolutions to fund the federal government. The dysfunction and
uncertainty in the federal budget process not only negatively
impacts state and local governments, but it also causes
significant damage to our national defense efforts.
The way we are doing business today is irresponsible. While
under Republican control, this Committee reported a budget
resolution every year. On the other hand, the Democrat majority
failed to do a budget resolution last year and will not be
doing a budget resolution this year. In order to truly
capitalize on this historic moment of economic prosperity for
the benefit of state and local governments and all Americans,
we must finally come together to put our nation's finances on a
sustainable path.
As a former mayor, I look forward to hearing from the
hardworking and dedicated state officials here with us today.
[The prepared statement of Steve Womack follows:]
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Mr. Womack. Thank you, Mr. Chairman, and I yield back the
balance of my time.
Chairman Yarmuth. I thank the Ranking Member for his
opening statement.
If any other Member has an opening statement, you may
submit those statements in writing for the record.
Once again, I want to thank all of our witnesses for being
here this morning. The Committee has received your written
statements, and they will be made part of the formal hearing
record. Each of you will have five minutes to give your oral
remarks.
Dr. Gordon, you may begin when you are ready. You are
recognized for five minutes.
STATEMENT OF TRACY GORDON, PH.D., SENIOR FELLOW, URBAN-
BROOKINGS TAX POLICY CENTER; JEANNE LAMBREW, PH.D.,
COMMISSIONER, DEPARTMENT OF HEALTH AND HUMAN SERVICES, STATE OF
MAINE; THE HON. MARK POLONCARZ, COUNTY EXECUTIVE, ERIE COUNTY,
NEW YORK; THE HON. LARRY WALTHER, CHIEF FISCAL OFFICER AND
SECRETARY, DEPARTMENT OF FINANCE AND ADMINISTRATION, STATE OF
ARKANSAS; AND KIM MURNIEKS, DIRECTOR, OFFICE OF BUDGET AND
MANAGEMENT, STATE OF OHIO
STATEMENT OF TRACY GORDON, PH.D.
Dr. Gordon. Thank you. Chairman Womack, Ranking Member--
excuse me, Chairman Yarmuth, Ranking Member Womack, and Members
of the Committee, thank you for having me here today to talk
about the importance of the federal budget to state and local
governments. The views I express today are my own, and should
not be attributed to the Tax Policy Center, the Urban
Institute, the Brookings Institution, their boards, or their
funders.
In this short testimony I would like to make three main
points: first, state and local governments are key economic
players and service providers; second, both of these roles are
severely tested in recessions and other economic shocks; third,
the federal government often steps in to help state and local
governments, but it could do more.
On the first point, state and local governments spend $3
trillion a year. They employ one out of every seven workers,
more than any other industry, including manufacturing, retail,
health care, and the federal government by a factor of seven to
one. Since World War II they have contributed an average of .3
percentage points to real annual GDP growth. States and
localities fund more than 90 percent of and deliver nearly all
public K to 12 education. They undertake nearly 80 percent of
all government spending on roads, bridges, water, and other
infrastructure, not including their spending from federal
funds. Together with the federal government, states administer
the social safety net, including programs like Medicaid,
unemployment insurance, and Temporary Assistance to Needy
Families.
States and localities are often hard hit in recessions.
states, in particular, tend to rely on pro-cyclical revenues,
ones that rise and fall with the economy. But state spending is
counter-cyclical, meaning that it generally rises in a downturn
because of greater demands for public programs, especially
those targeted to the low-income and unemployed. This mismatch
creates problems for state and local elected officials, who
must generally balance their budgets each year. It also poses
problems for the larger economy, because tax increases and
spending cuts undertaken to close projected budget gaps can
undermine a national economic recovery.
Policy makers have long recognized these potential harms
from state and local budget tightening. In the 1970's they
experimented with various forms of counter-cyclical assistance.
However, aid was often poorly targeted, slow to arrive, and not
spent quickly. In the early 2000's Congress appropriated $10
billion in one-time population-based grants to states, plus $10
billion in Medicaid funds through a temporary increase in the
federal matching rate.
The American Recovery and Reinvestment Act was the next
major experiment with counter-cyclical fiscal assistance,
directing nearly $290 billion to the nation's state and local
governments. The Recovery Act worked faster than the 2003 bill,
and many would argue it was more effective. Aid started to flow
almost immediately, and it was retroactive. In addition, the
Recovery Act was better targeted to places that were affected
in the downturn.
The federal government should do more to help prepare for
regional economic shocks, and help places that are left behind
in the current recovery. The federal government allocates
roughly $700 billion a year, or about 3.5 percent of GDP, in
grants to states and localities each year. The federal
government also helps states and localities through the tax
code, allowing federal taxpayers to deduct state and local
taxes, and generally excluding municipal bond interest payments
from individual taxable income.
Federal money isn't a bailout, it is a quid pro quo. The
federal government recognizes that states and localities have
certain advantages when it comes to customizing programs to
their populations, geographies, and costs. It wants to
encourage them to spend more on valued goods and services whose
benefits may extend across jurisdictional lines, or that are
important to all Americans. That is why the federal government
has long distributed grants to state and local governments,
almost always with strings attached.
However, the U.S. intergovernmental grant system falls
short in two key respects.
First, federal grants do a poor job responding to divergent
regional fortunes. Federal policymakers should re-examine
funding formulas that may be out of step with current social
and economic conditions. Examples include Medicaid, Title 1
education grants, highway grants, and community development
block grants.
Second, federal grants often are not as responsive as they
could be to economic shocks or recessions. To address this
problem, policymakers ought to consider making permanent and
automatic a feature of the Recovery Act that allocates more
places to--more money to places experiencing drops in
unemployment.
At a minimum, the federal government could help states and
localities by reducing uncertainty associated with late
appropriations, short continuing resolutions, and threatened
shutdowns. It could also minimize the use of expiring tax
provisions.
In summary, the U.S. federal, state, and local partnership
did not come easily. It evolved over a 200 years that included
defaults, bailouts, a civil war, the introduction of new
revenue sources, and major social insurance programs, and lots
of trial and error. It is an enduring and robust partnership,
but it is a work in progress. There are several ways in which
the federalist system could be made stronger, especially in a
crisis.
Thank you. I look forward to your questions.
[The prepared statement of Tracy Gordon follows:]
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Chairman Yarmuth. Thank you for your testimony.
I now yield five minutes to Dr. Lambrew.
STATEMENT OF JEANNE LAMBREW, PH.D.
Dr. Lambrew. Great. Thank you, Chairman Yarmuth, Ranking
Member Womack, and Members of the Committee. It is an honor to
be invited to discuss how federal investments affect the state
of Maine.
We enter Maine's bicentennial year celebrating our
strengths. This includes a good economy: Maine's unemployment
rate has been below 4 percent 47 consecutive months. And
Governor Mills's first budget responsibly invested in health
care, education, economic development, clean energy, and a
rainy day fund.
But Maine faces economic challenges, as well. These include
fewer workers and slow GDP growth. We are hard at work on
actions to implement a recently released, strategic, statewide
economic development plan. But we cannot do it alone. Federal
grants represent 34 percent of the Maine State budget, above
the national average. In the biennial budget, federal funds
represented 58 percent of the Maine Department of Health and
Human Services' $9.6 billion budget.
As you are aware, Congress has not recently significantly
changed federal funding for discretionary health and human
services programs, except for opioid response. We are grateful
for that funding, but urge it to be allocated based on up-to-
date information on this rapidly changing crisis.
We also receive federal funding for entitlement programs.
The majority of federal funding to DHHS is for Medicaid, called
MaineCare. Governor Mills's first executive order was to direct
its expansion. The MaineCare expansion has cumulatively covered
57,000 people, providing over 16,000 mental health treatments.
The program is essential to our fiscal, as well as our public,
health.
Because of this, I would like to focus on the triple threat
to federal funding for Medicaid.
The first threat is congressional proposals to cap or block
grant Medicaid. Last year's president's budget would shift from
the federal government paying a percent of cost to a pre-set
dollar limit. This would leave states largely, if not fully, at
financial risks of high costs due to unexpected events such as
recessions or natural disasters. Maine will be particularly
vulnerable to unaffordable cost shifts, given its high
percentage of older and low-income residents. Additionally, it
is not clear whether the proposal would include the costs of
recent expansions.
The second threat is through executive actions that limit
federal funding by constraining state options. This fall the
Centers for Medicare and Medicaid Services, or CMS, proposed a
Medicaid financial accountability regulation called MFAR. It
would change longstanding policies on taxes, intergovernmental
transfers, and other sources of state financing. CMS has told
me that one type of tax implicated by this proposal, a $58
million service tax on providers, would have to be repealed,
replaced, and returned to providers who paid it back to 2016.
Even in a good economy, there will be a challenge. This may be
why, unlike most rules, CMS did not quantify MFAR's impact on
states.
Perhaps most importantly, CMS proposes to give itself the
power to make subjective determinations on what does and does
not constitute permissible sources of state financing. In so
doing, the proposal--proposed rule shifts the balance of powers
decisively away from states.
The third threat is through the courts. Republican-led
states, backed by the Trump Administration, seek to strike down
the Affordable Care Act in the case of Texas versus the U.S.
Should the plaintiffs prevail, the uninsured rate in Maine
would increase by an estimated 65 percent. Maine would lose an
estimated $495 million each year in federal Medicaid and
marketplace funding. Uncompensated costs--care costs would
rise, straining our hospitals.
Governor Mills signed into law LD 1, which codifies the
Affordable Care Act consumer protections. It would protect up
to 230,000 people in Maine who have pre-existing conditions
under a narrow ruling in the case. But under a broad ruling,
another 360,000 people will be at risk of denial. This level of
damage cannot be reversed by states.
Opportunities to strengthen federal-state partnerships are
also under discussion. Last fall you heard testimony on
creating federal funding formulas that would help states
deliver services effectively and efficiently. For example,
setting the federal matching rate for Medicaid to automatically
increase with the state's unemployment rate would sustain local
economies during downturns. And the House-passed bill this--
last year will provide $200 million for state-based
marketplaces, like the one that Kentucky ran that was
incredibly successful--until recently.
Governor Mills and legislative leaders recently introduced
legislation for that purpose. This would strengthen state
resiliency.
In closing, federal-state partnerships are essential to how
we provide services in Maine and nationwide. But it indeed
needs to remain that--mutual and accountable--rather than an
imbalanced and uncertain relationship.
Thank you.
[The prepared statement of Jeanne Lambrew follows:]
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Chairman Yarmuth. Thank you for your testimony.
I now recognize Mr. Poloncarz for five minutes.
STATEMENT OF MARK POLONCARZ
Mr. Poloncarz. Thank you. Good morning, Chairman Yarmuth,
Ranking Member Womack, and to all the Members of the Committee.
I am glad to be here this morning to share my unique
perspective as county executive on the vital role federal
investments play in stabilizing America's local communities,
especially during difficult economic times.
First, I would like to share a little background on the
community I represent. Erie County is a microcosm of our--
America. It has an urban core in Buffalo, many suburbs, and
hundreds of square miles of family farms and rural communities.
There is 920,000 people that live in my county, making it
larger than five states, and it is approximately the same size,
geographically, as the state of Rhode Island.
Like other Great Lake areas, Erie County struggled at the
end of the 20th century, with the loss of population and jobs.
However, in recent years we have seen our population increase,
and an economic resurgence as we have transitioned from a blue
collar economy to one based on financial services, health
sciences, education, and advanced manufacturing.
As executive, I manage an annual budget of $1.8 billion,
dozens of departments, and a work force of 5,000 employees.
Despite having such a large budget, only $125 million is truly
discretionary in nature. The vast majority of county spending
is for programs mandated by federal and state government, but
administered at the county level.
For example, Erie County is the primary provider of health
and human services for the region. Programs like Medicaid,
TANF, SNAP, WIC, Meals on Wheels, and so many other programs
are delivered by the county. As part of the delivery of those
services, the county often has a substantial local share. Erie
County's share of Medicaid in 2020 alone is more than $200
million.
Our departments of health and human--and mental health have
led the effort in combating the opiate epidemic, with
substantial grant assistance provided by various federal
agencies. I am proud to say the Justice Department's Bureau of
Justice Assistance considers Erie County to be the model county
on how to respond to the opioid crisis.
However, we would not be in that position--meaning more
people would have died--without the significant financial
assistance received from the federal government. Any reductions
in federal funding in the above-discussed programs would have
an immediate and significantly negative impact on our ability
to deliver services promoting our residents' health and
wellness.
We have closely reviewed and monitored every budget
proposed by the Trump Administration, determining that many of
the President's proposals would have a disastrous impact
locally.
For example, New York, already facing a multi-billion-
dollar Medicaid shortfall, would be severely punished under the
block grant system previously proposed by the President. If
implemented, we would be forced to significantly raise taxes to
make up for the lost assistance, or cut other popular programs
like libraries and parks.
Furthermore, the county administers the Department of
Housing and Urban Development's Community Development Block
Grant Program for 34 municipalities, including our entire rural
area. These grants, which require a local match, support
everything from mainstream improvements to clean water
projects. These grants are a vital lifeline to help our smaller
communities address specific needs, just as they helped the
city of Buffalo build affordable, safe housing. Should the CDBG
program be eliminated as the Trump Administration has
repeatedly proposed, all areas of our county--urban, suburban,
and rural--would be negatively impacted.
Another key area that has been impacted from a lack of
federal assistance is our infrastructure. Erie County owns and
maintains more than 2,400 lane miles of roads. That is more
than the states of Delaware, Hawaii, and Rhode Island each
have. Federal dollars used to play an important role in
completing many projects a year. Unfortunately, with no major
federal infrastructure bill in recent years, we have been only
able to complete a few large projects with the limited federal
assistance we received.
That is why I strongly support legislation introduced by
Congressman Higgins. It would provide a major investment in our
roads, bridges, and other infrastructure, support good-paying,
middle wage--or middle America jobs, and will be desperately
needed during any future recessions.
Finally, let me give you an example of how the failure to
pass the federal budget on time can have a significant impact
on our local economy. Our Buffalo and Erie County Workforce
Investment Board is a local organization supported by federal
aid appropriated through the Workforce Innovation and
Opportunity Act, WIOA. The employees of the board work with
local employers and job seekers to sustain and grow our
economy.
However, when the federal government shuts down, those
employees are furloughed as well, because their salaries are
paid for by federal WIOA dollars. The last thing any region
could afford in a recession is furloughing the people whose job
it is to help other people find jobs and employers fill jobs.
This is just one small but important example of how targeted
federal assistance helps--grows local economies, and how
reducing aid or the shutdown of the federal government during
economic downturn would negatively impact a region.
Erie County's economy is growing, but I can't imagine what
our fiscal picture would be if some of the President's prior
budget proposals had been enacted, nevertheless during a
recession.
I thank Congress for bipartisanly rejecting the proposed
cuts in the past. And if they are included in the 2021 budget,
I would urge you to reject them again.
Thank you for your time, and I look forward to your
questions.
[The prepared statement of Mark Poloncarz follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Yarmuth. Thank you for your testimony.
I now yield five minutes to Secretary Walther for his
testimony.
STATEMENT OF LARRY WALTHER
Mr. Walther. Chairman Yarmuth, Members of the Committee,
thank you for the opportunity to speak to you today. Thank you
to Ranking Member Womack for the invitation.
I would like to share with you a brief overview of the
budgeting and planning process in Arkansas. To do this we must
go back to the late 1920's and early 1930's.
Arkansas was experiencing the great flood of 1927, a
significant road debt that was transferred to the state from
the counties, and the overall Great Depression. As a result,
Arkansas was struggling to maintain state services, and
defaulted on its debt.
A variety of new taxes were implemented around this time to
address the state's budget needs. However, this didn't solve
the issue, and the state needed a long-term solution. This was
established through amendment 20 to the Arkansas Constitution.
In simple terms, we are constitutionally barred from borrowing
money without a vote of the citizens.
Arkansas maintains a true balanced budget approach to
funding state programs. We do not commit state dollars until we
have those dollars in hand and available to spend. Under
Arkansas law it is my duty to see that the funds on hand and
estimated to be available to each state agency are sufficient
to maintain state services on a sound, fiscal basis, without
incurring a deficit.
Our annual budgeting process doesn't just allocate dollars
to state programs, it prioritizes the spending. Through this
process, agencies make tough decisions, but also have a clear
understanding of what will take place in all the budget
scenarios.
Another consequence of barring--of being barred from taking
on debt is our need to build fund balances in support of the
most important programs. In order to safeguard state programs
in the case of a recession and to allow us to remain
competitive when opportunities arise, Arkansas has recently
invested a series of reserve funds. Under Governor Asa
Hutchinson we maintain three such funds: a restricted reserve
fund, a long-term reserve fund, and a rainy day fund. Each of
these play a unique role.
Since Governor Hutchinson took office in January 2015,
three of the largest individual tax cuts in the state's history
have been implemented. This includes a middle-income tax cut in
2015, a cut for low-income Arkansans in 2017, and an upper-
income tax cut that became effective January of this year.
These historic cuts reduced income taxes for each state tax-
paying Arkansan. However, all of these tax cuts were absorbed
without any change or reduction in the state services, due to
responsible budgeting and an economy that continues to expand.
Federal funds remain a significant component of the day-to-
day operation of the state services. In Fiscal Year 2019, which
ended in June 2019, federal dollars accounted for 29 percent of
our expenditures. The largest portion, approximately $6
billion, supports our Department of Human services, which
administrates--administers the state's Medicaid program.
We must also acknowledge federal funds' crucial role in
addressing natural disasters and emergency. In 2019 Governor
Hutchinson and President Trump declared an emergency in the
state due to immense flooding on the Arkansas River. While
Arkansas maintains both a balanced budget and several reserve
funds that can significantly help with--in these scenarios, a
disaster of this scale requires immediate support from the
federal funds. Due to President Trump's declaration and the
work of FEMA, federal funds were made available at the time,
and remain available today for those recovering from the damage
caused by the event.
I believe that the state-federal partnership is at its best
in these times of need. From Washington, DC. to those in
Arkansas impacted by these events, it simply becomes people
helping people.
We are grateful for the decision that was made that allowed
for this to--partnership.
Before taking--before making any request at the federal
level, it is up to the state to determine specifically what we
hope to accomplish, and the amount needed to responsibly
address these needs. Understanding the importance of making
this type of ask of the federal government and the state, we
always carefully consider the need that go along with our--plus
our resources before we bring them to you.
Again, thank you for the honor of speaking to you today,
and I look forward to any questions.
[The prepared statement of Larry Walther follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Yarmuth. Thank you very much, Secretary. I
appreciate your testimony.
And, last but not least, I yield five minutes to Director
Murnieks.
STATEMENT OF KIM MURNIEKS
Ms. Murnieks. Thank you, Chairman Yarmuth, Ranking Member
Womack, and Members of the Budget Committee. I am honored to be
with you here today.
As Ohio's Budget Director I serve as a Chief Financial
Officer for our state under the leadership of Governor Mike
DeWine.
Federal funding supports Ohio citizens in crucial areas,
and Ohio's biennial state budget supports these initiatives, as
well. To understand our budget picture it is important to first
discuss our economic outlook.
Ohio's economy is strong and likely to continue expanding
in 2020. Ohio's non-farm payroll employment has increased by
6,700 jobs, just in November. Our unemployment rate is down.
Our labor participation rate is up. Ohio manages $28 billion in
federal grant funds each year, which is roughly 40 percent of
our budget. Federal grants in Ohio are administered by 36
different state agencies, aligned with federal agencies,
utilizing 58 different systems and tools, with approximately
800 state employees dedicated to grants administration and
compliance.
As Governor DeWine has said, our focus is on people, not
bureaucracy. We need regulatory flexibility to address the
individual needs of our citizens instead of continuing to focus
hundreds of employees on simply meeting burdensome federal
strings.
In the 1-year and 1 day since becoming Ohio's Budget
Director, I have been traveling throughout the state to visit
with local officials. I have learned that our local governments
find it difficult to navigate the grants administration
process. And I am concerned that the communities with the most
needs do not have the resources to apply for grants. So Ohio is
taking steps to break down these silos by creating a grants
department within the budget office to coordinate across
agencies.
Today I would like to share with you one example of where
Ohio has cut through bureaucracy to directly improve the lives
of our citizens using state and federal funding together: our
focus on multi-system youth, the children who are involved in
two or more child-serving systems.
As Governor DeWine has stated, too many families lack
access to the care that their children need to be happy and
healthy. For some families, this results in parents making the
unfathomable choice to relinquish custody of their child to
help them get the care that they need. As a result of Governor
DeWine's leadership, four executive-branch departments, three
county-level associations, and many nonprofit organizations are
now working together to coordinate care.
Ohio has dedicated $31 million in new state funding, which
is being used to support individual children with extremely
complex needs who are eligible for federal Medicaid and Title
IV-E funding. When combined in a coordinated fashion, these
layers of funds can produce better outcomes for our children
and families. Investing in our children is investing in our
future, and we welcome even more federal flexibility to allow
us to do even more.
In Ohio we are leading by example, eliminating burdensome
and unnecessary regulations through initiatives like our Common
Sense Initiative, which reviews business-impacting roles, and
the one-in/two-out rule, which requires business--which
requires the repeal of two regulations at the state level each
time we adopt a new regulation.
One of Governor DeWine and Lieutenant Governor Husted's
main priorities is building a better Ohio through job training
and work force innovations. Ohio has more than 75 job-training
programs across 12 state agencies. Many align with various
federal agencies and regulations.
In the past, the biggest impediment for businesses seeking
to locate or expand in Ohio was our tax structure. We have
addressed that. Ohio's business climate has now reached the top
three in site selection magazine state rankings, making us the
top state in the Midwest.
Today our employers' biggest challenge is hiring qualified,
skilled workers for high-paying jobs. Ohio currently has over
65,000 open jobs that pay more than $50,000 per year. So now is
the time for us to work together to streamline work force
development programs to ensure that our states can compete and
win in the global economy.
Many of the examples that I talked about today and that are
in my written testimony required Ohio to obtain waivers from
federal rules. Each waiver requires extensive paperwork and
precious time, time that could be better spent in direct
service of the needs of our citizens. Flexibility should be the
rule, and not the exception. We ask that you continue your
efforts toward reducing the burdens so that we can maximize
taxpayer dollars together.
Mr. Chairman, Members of the Committee, thank you for
holding this important hearing today, and for allowing me the
honor to be with you for this discussion. I am happy to answer
any questions that you have.
[The prepared statement of Kim Murnieks follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Yarmuth. Thank you very much for your testimony,
and thanks again to all the witnesses. We will now start our
question-and-answer period. And, as is customary, the Ranking
Member and I will defer our questions until the end.
So I now yield five minutes to the gentleman from New York,
Mr. Higgins.
Mr. Higgins. Thank you, Mr. Chairman. County Executive
Poloncarz, in your introductory information you said that the
Erie County budget is $1.8 billion, annually, 87 percent of
which is unreimbursed, New York state-mandated spending.
New York is one of only a handful of states that require
counties to provide a local match, which eats up a significant
portion of your revenue base. Despite this, you have become a
national leader on efforts to combat opioid addiction and its
associated deaths.
While this is a continuing battle, a continuing struggle,
what is it that Erie County has done under your leadership to
achieve results that make Erie County and their efforts to
combat opioid addiction an outlier?
Mr. Poloncarz. Well, thank you, Congressman Higgins, for
those kind remarks.
When we started realizing we had a significant crisis at
the end of 2015, I brought together my health commissioner,
mental health commissioner, to co-chair a task force, like many
other communities have done with task forces. But I told them
to try everything and anything.
I looked at dealing with the opioid epidemic because it was
so widespread. It was affecting individuals in the city of
Buffalo, just as much as it was affecting individuals in the
town of Concord and Sardinia, which are your rural communities,
or some of our rural communities. And I tried--in the back of
my mind I thought of what FDR did when he entered the Great
Depression, which is try something, try everything, try
anything. If it doesn't work, move it to the side, try again.
So I have had the pleasure to work with also partners from
across the country through the National Association of Counties
to basically share information.
This is not a partisan issue. And we have come together as
Democrats and Republicans to address the opioid epidemic. And
what we found out is there is no one answer. It is about
education. It is about medication-assisted treatment, and
ensuring you have more treatment availability. It is about
changing prescriber guidelines. It is about getting people when
they are young, because, unfortunately, a number of the
individuals who are dying are teenagers, and they became
addicted at very young ages, which you would hope never
happens, but does.
But it literally was we have to try everything. If it
doesn't work, toss it aside, try something else. But by all
means, as FDR said, try something. And, as a result, we have
had significant success.
But we would not have had that success without the
assistance from the federal government of grants that we have
received from the Department of Justice, Department of Health
and Human Services, because they gave us the opportunity to try
some of those things that I would not have otherwise. I would
not have had the local dollars to do it, if I had not received
the grant opportunities from the federal government to do an
opioid court.
Everyone hears of drug court, but we are doing a
specialized opioid court in the city of Buffalo, in which the
judge or the judge's staff meets with the individual on a daily
basis, compared to most drug courts, where they may meet with
them on a monthly basis. We would have not been able to do that
without the assistance we received from the Department of
Justice's Bureau of Justice Assistance. And I thank you for
helping procure that grant, which has shown tremendous success,
especially when you compare it to traditional drug courts,
where the individual may meet with the judge or the judge's
assistance monthly. It has had a tremendous success.
Every death is one death too many. And I have had to attend
too many funerals during my tenure as county executive, or
wakes for individuals who died, including people that I know.
But what we have done is we have said we are going to continue
to fight this until there is no longer an epidemic.
We have rolled up our sleeves. We work with our partners.
It really doesn't matter what your political party is. All that
matters is, are you willing to help? And if you are, can you
make a difference? And that is why our community has come
together to address it. And I am proud to say that our
overdoses are down, our deaths are substantially down. There is
more people in treatment, and less people are becoming addicted
in the first place. And that is how you are going to end this
crisis in the long run, by ensuring that less people are
addicted in the first place. And a lot of the assistance we
receive from the federal government has made the difference.
Mr. Higgins. Just a final thought on the issue of federal
investments and how they impact local communities.
The recent tax cut plan primarily to corporations--for
every dollar that you give away in a tax cut, most economists,
even the most conservative, say that you can hope to retain or
get back about $.32. So the loss on investment is 68 percent.
But if you look at federal programs like the Great Lakes
Restoration Initiative, showing that for every dollar you spend
you get $4 in economic growth at the local level, the Community
Development Block Grant Program, the infrastructure spending,
historic tax credits, which have played a primary role in the
revitalization of Buffalo and Erie County, those are good,
solid investments into the growth of the American economy, and
they help county executives like Mark Poloncarz, because there
are more sales tax revenues when you have growth, there are
better property tax revenues, as well.
Chairman Yarmuth. The gentleman's time has expired. Before
I yield to the gentleman from Ohio, as a reminder, Members can
submit written questions to be answered later in writing. Those
questions and the witnesses' answers will be made part of the
formal hearing record. Any Members who wish to submit questions
for the record may do so within seven days.
As we usually do--never mind, that is all. I now yield five
minutes to the gentleman from Ohio, Mr. Johnson.
Mr. Johnson. Thank you, Mr. Chairman. You know, the purpose
of today's hearing is to discuss why federal investments
matter. And, as the representative of rural eastern and
southeastern Ohio, I can tell you I understand the importance
of providing stability and certainty to our state and local
governments.
But I am deeply concerned by the premise that stability
requires significant increases in federal spending or federal
funding. If Congress wants to provide stability and certainty,
we can start in this very Committee by enacting legislation to
reform the congressional budget process. In fact, I believe
Congress should embrace biennial budgeting, and prepare a
budget every two years, rather than every year.
Director Murnieks, I know biennial budgeting has a long
history at the state level, and Ohio currently operates with a
two-year cycle. Based on your experience, do you believe that
biennial budgeting would allow for better long-term planning at
the federal, state, and local levels?
Ms. Murnieks. Thank you, Congressman Johnson. I do believe
that federal budgeting would benefit by a more planful process.
Biennial budgeting does provide that opportunity. It requires
the government to look in advance to forecast revenues and
expenditures over a longer period of time, which, by--you know,
just by definition, is more planful.
It would also allow states to have more certainty in what
the future funding for individual programs and priorities would
be. So, yes, absolutely, I think that would be beneficial.
Mr. Johnson. OK, thanks. You know, there is no question
that the economy is strong. And you talked about how Ohio's
economy is strong. And I certainly agree with that. The economy
in my district is very strong. Last month marked the 126th
consecutive month of economic growth, and the national
unemployment rate is at a 50-year low.
We are also seeing the effects of a strong economy in our
state, across the state, where we have had historic
unemployment rates and--or historically low unemployment rates.
In fact, over the last 12 months Ohio has added 20,600 jobs,
and 96,831 Ohioans found jobs, according to the U.S. Congress
Joint Economic Committee.
So, Director Murnieks, in your testimony you mentioned that
the biggest challenge for employers today is hiring qualified,
skilled workers for high-paying jobs. Can you get a little bit
more specific about what Ohio is doing to grow the work force
and continue the strong economy, given that we have low
unemployment rates and thousands of openings, jobs across the
state?
Ms. Murnieks. Yes, Congressman Johnson. We are focused on
preparing our work force for the jobs of the future. We are
looking at a program that was just signed into law by Governor
DeWine a couple of days ago as the TechCred program. And at the
state level that is focusing our resources and providing
employers with the opportunity to upskill their work force, to
improve their skills, to gain credentials for the jobs that
we--that are in high demand in Ohio.
And I mentioned in my testimony that the Federal Workforce
Development Programs are spread across several different
departments, and we are looking at how we can bring those
together through our Office of Workforce Innovation. We are
focused on the future, but more flexibility would help us to
get there.
Mr. Johnson. Good, good. You know, I--one of the things
that I love about our state, we have built, over time, a--great
working relationship with our labor groups across the board.
And they have been proactive in working with us on work force
development.
In my district there is a growing demand for highly trained
and skilled workers, for example, in the construction trades.
And many unions and employers rely on apprenticeship programs
to meet this demand. Very briefly, in the last half-a-minute
that we have got, what is Ohio doing to promote these
apprenticeship programs?
Ms. Murnieks. We are working with employers to promote
apprenticeship programs, job training programs. We have
initiatives that were funded through our state budget to focus
both state and federal resources on apprenticeship programs.
And we are focused on areas like your district.
And I am from southeast Ohio, as we talked about earlier,
and it is important that we improve the skill set of the
workers in our area so that they can be ready for those jobs.
We have opened jobs in Ohio; we need the workers to fill those.
Mr. Johnson. OK. Thank you, Mr. Chairman. I yield back.
Thank you.
Chairman Yarmuth. The gentleman's time has expired. I now
recognize the gentleman from Pennsylvania, Mr. Boyle, for five
minutes.
I am sorry, Mr. Boyle is gone. Now I will recognize the
gentleman from North Carolina, Mr. Price, for five minutes.
Mr. Price. Thank you, Mr. Chairman, and thank you for
organizing this important hearing on the impact of federal
dollars on our states and localities.
I am chairman of the Appropriations Subcommittee on
Transportation HUD. So I am, naturally, acutely aware of the
shortfalls in housing funding across virtually all HUD accounts
and the shortfalls in our communities, in terms of people who
need and would benefit greatly from some support for their
housing, and they don't have it. It is simply not there.
So we have a couple of ways of dealing with this. The
direct funding is what our subcommittee deals with. But I want
to ask you today--and I will start with you, Dr. Gordon, and
ask others to chime in who have experience in this area.
Today I want to focus on the tax code. The direct funding
is important, and we have block grants, of course, like CDBG
and HOME. They are often used as gap financing. They are
combined with other funding sources. We know how important
those are, and we have been able to increase them incrementally
in recent years. We know we need to keep on that path.
But the tax credits are less known, but maybe, in some
circumstances, even more important. I think particularly of
addressing gentrification, the kind of efforts we make in our
cities to identify tracts of land to encourage development, to
bring in the private sector. My experience has been that these
tax credits, especially the 9 percent tax credits, are
extremely important. But these cities are lucky if they get one
of those per year.
And so, the supply of tax credits, especially the 9 percent
credits, the distribution of tax credits--as you see how this
works across the country, I would appreciate your commenting on
the importance of this incentive to housing development,
affordable housing development, and also any comments you have
about not just the quantity, the availability of these credits,
but also how they are distributed and how they work.
Dr. Gordon. Thank you, Congressman. I think, as an
economist, the issue with any kind of subsidy for state and
local governments to undertake activities that are valued by
the federal government is what should the rate of the subsidy
be.
So you mentioned the 9 percent credits. I think the issue
that economists would point out is that there are often other
types of credits at other subsidy rates, and the same thing is
true with grant programs. And, for that matter, things like the
home mortgage interest deduction, which are intended to spur
housing consumption, there is no reason to think that the
marginal tax rate of a high-income taxpayer is necessarily the
right subsidy rate.
So I think the concern that I would have is, just looking
across the board at all of these programs, and trying to
determine whether you are encouraging the activity in a way
that you want to encourage it, and whether it is the
appropriate subsidy.
Mr. Price. But isn't--what is your experience with 9
percent versus 4 percent? Of course, 4 percent sounds
attractive, as well. But the--what I keep hearing is that there
is a big difference, and that the--to really spur the kind of
diversity of housing development that we need, that there is
just no substituting for the 9 percent credits, and that they
are very scarce.
Dr. Gordon. Right. So clearly, you know, having a richer
subsidy would encourage more activity.
I think the question is always about tradeoffs, and at what
cost. I would refer you to some of the work that my colleagues
at the Urban Institute have done, specifically on low-income
housing tax credits and, you know, thinking across the board
about the mix of different kinds of tax credits, and also tax
incentives versus direct grants, as you said.
Mr. Price. Well, I would appreciate, if there is
particularly anything that would be relevant to the hearing
record on this, to refer us to this.
I am reflecting, of course, my own local experience, and I
guess I am registering the view that direct funding is not the
total solution here. Never will be, probably. The HUD budget
has a long way to go. But these tax credits have been a very
potent instrument for encouraging diverse development. But
there is certainly a shortfall in terms of the demonstrated
need.
Any other witnesses want to chime in on this?
Yes, sir.
Mr. Poloncarz. If I may, Congressman, all kinds of
assistance is crucial. But in the city of Buffalo, historic tax
credits and other types of tax credit programs have been one of
the key drivers of the economic development, taking abandoned
warehouses, abandoned facilities, working with tax incentives
that we offer from local government to make these projects
actually worthwhile, because they are so difficult to do. And
if you eliminate those tax credit programs, you are going
eliminate a great opportunity in some of these older Rust Belt
communities to take these abandoned buildings and turn them
into what they are today: housing, new offices that, for
decades, sat vacant. And if that program was eliminated, that
would have a tremendously negative impact, especially on the
older communities with an old building stock.
Mr. Price. Thank you.
Thank you, Mr. Chairman.
Chairman Yarmuth. The gentleman's time has expired. I now
recognize the gentleman from Missouri, Mr. Smith, for five
minutes.
Mr. Smith. Thank you, Mr. Chairman. It is a new year, which
means this Committee has another chance to mark up a budget
resolution. The deadline for the congressional budget for this
coming year is in 91 days. I hope we can start off this year on
the right track with--hopefully, we pass a budget resolution
through the Committee, through Congress. A budget provides
stability, much as you all have testified. Our job on this
Committee is to establish a framework for the appropriators to
effectively do their job.
When Republicans were in the majority of this Committee, we
delivered on a budget every single year. And for the past three
years President Trump has, too. But last year, under Democrat
control, we didn't even attempt to produce a budget resolution.
Because of failed leadership by the Democrat majority, our
country is relying on a flimsy two-year agreement that fails to
provide anything close to the 10 years of certainty to a budget
resolution.
Now we are here today to discuss the federal--how the
federal government can better provide stability to state and
local governments. Looking over a report that was published
last week by the majority in preparation for today's hearing, I
can't say I disagree with you, Mr. Chairman. The report
states--and I quote--that ``Federal budget uncertainty is
harmful to states and localities.'' And, quote, ``continuing
resolutions make it difficult for states to plan and implement
strategic, long-term investment.''
So taking the majority's own report into account, why
hasn't this Committee done its job and marked up a budget
resolution? That is what we should ask ourselves. Why are
Democrats OK with continuing resolutions with our government,
and provide nothing but uncertainty and instability to the
American people?
The Committee needs to start doing its job. It is time we
give our budget process a thorough review, modernizing a broken
process that will hold Members accountable.
In Washington State, failing to pass a budget at least one
month before it is due is a misdemeanor. That is impressive.
And in California, of all states, their legislators go without
pay if they don't pass a budget. Washington State, California.
Pretty serious, serious issues if you don't pass a budget.
Where are we at, at the federal level? Why are we any
different? Why should we not have those same kind of
responsibilities or guidelines? We can do better. I hope that
we do better. And I hope we get things done this year.
I yield back, Mr. Chairman.
Chairman Yarmuth. I thank the gentleman. His time has
expired.
And, just as a comment, the Ranking Member and I served for
the entirety of 2018 on the Joint Select Committee on Budget
Reform. The gentleman from Arkansas led that joint select
committee with great distinction and great commitment, and we
discussed many of these ideas and, unfortunately, could not
come to any agreement on how to reform the Budget Committee.
So if you have any specific ideas that--for how we can do
that, I would love to hear them.
Mr. Womack. By the way, if the gentleman will yield for
just a brief moment, for the record let it be known that the
Chairman of this Committee, John Yarmuth, was a yes vote on
that budget process reform proposal. And that is not a small
undertaking. There were two members of the party that voted in
favor of those proposals, and the Chairman is one of those.
So I think, in defense of the Chairman, he gets it. He
understands that this process is broken, and I think everybody
on this dais would probably agree that the process is broken.
The solution as to how to fix it, though, is somewhat elusive
to the Congress right now.
Chairman Yarmuth. I thank the gentleman for his comments,
and I would just make one more remark to the gentleman from
Missouri. Anybody who expects to have certainty for 10 years in
today's world is badly mistaken, too, I think, or is wildly
optimistic.
I now yield five minutes to the gentlelady from Illinois,
Ms. Schakowsky.
Ms. Schakowsky. Thank you, Mr. Chairman. Climate change is
the greatest challenge facing humanity today. This is--just
this month alone we saw headlines that said, ``Earth posts
second hottest year on record to close out our warmest
decade.'' Another, ``Australia fires push some species to the
brink of extinction,'' and another, ``Floods, exacerbated by
climate change, could destroy Venice.' ''' So it is worldwide.
And I have seen the effect even in my own community, where
the levels of Lake Michigan are at almost their highest level.
We saw flooding of Lake Shore Drive in Chicago, and severe
damages around the lake shore.
I hope I pronounce it right--Mr. Poloncarz, is that
correct? Good enough?
Mr. Poloncarz. That is correct.
Ms. Schakowsky. OK, good. Last year you reaffirmed Erie
County's commitment to the Paris Climate Agreement, with Erie
County government already reducing its greenhouse gas emissions
by 28 percent. And Buffalo was even designated as a Climate
Smart Community. So I want to know. How did the federal
government and investment help Erie County in its effort to
reduce greenhouse gases, gas emissions, and become a Climate
Smart Community?
Mr. Poloncarz. Well, Congresswoman, there is no easy answer
to that, because there are so many different ways of going
about it, by ensuring that there are appropriate assistance and
credits to remove from a coal-based economy, a carbon-based
economy to a clean economy.
We have used and developers have used historic tax credits
to take advantage of building new wind farms and solar farms.
We proved, through my county, that you can actually meet the
standard of the Paris Agreement. We met it years before the
expectation you were supposed to meet it, and we continue to
see a reduction in greenhouse gas emissions.
One of the things that has been very helpful is assistance
from the EPA to create what is called a sustainable business
roundtable, in which our business community has taken the lead
and said, ``We want our businesses to succeed, not just
thinking about two, three, or four years from now, but 50 years
from now.''
And so they are using assistance that we have received from
the EPA to create a sustainable business roundtable to assist
local businesses, find ways to make themselves more
sustainable, to use, of course, less fossil-based fuels, but
also less water, if possible, because we--while we live in an
area in the Great Lakes that has a substantial amount of fresh,
clean water, and--we have also seen significant problems with
that fresh, clean water. All you got to do is ask my friends
from the other side of Lake Erie about what is going on with
the algae blooms, and how they had to actually stop drinking
water.
Ms. Schakowsky. That was actually on the front page of the
Chicago Tribune, a picture of the algae bloom, yes.
Mr. Poloncarz. I lived in Toledo. I went to the University
of Toledo College of Law. I know the area very well. And I
can't believe a city in a community that large has basically
said you cannot drink the water from the municipal system
anymore because of the harmful algae blooms.
We have worked very hard to find different ways. There is
no easy answer. But it does take a government coming to the
lead and saying, ``We will help others reach the potential that
they can when it comes to reducing their carbon emissions.''
And we have proven it.
And the good thing in our community is our business
community has stepped up to the plate and said, ``We want to
play a part, as well.''
Ms. Schakowsky. So what would be the impact on your
community's efforts to address the problem if federal funding
for the Department of Transportation, Housing, and Urban
Development or Environmental Protection Agency were cut, as has
been proposed by President Trump?
Mr. Poloncarz. Well, it would be substantial, Madam
Congresswoman. We know that the largest portion of greenhouse
gas emissions in Erie County right now is directly related to
transportation costs. So anything that we can do to take
vehicles off the road and to replace it with trains and other
types of processes and transportation that is actually not
using carbon-based fuels is going to make a big difference.
Community Development Block Grants have a huge impact even
in smaller communities. A $100,000 grant to a small town or
village in our rural areas could have a huge impact on,
actually, their entire budget. And if you take that away, they
lose the opportunity to take actions to create a cleaner,
greener community like clean water projects.
Ms. Schakowsky. I thank you for that. And that multi-
faceted support from the federal government is so important.
Thousands of experts are warning that climate change could make
large parts of the earth uninhabitable. And it is critical that
we invest in preparing communities for their demographic
changes and fighting for--to save our planet. You are doing a
great job. Thank you very much.
Chairman Yarmuth. The gentlelady's time----
Ms. Schakowsky. I yield back.
Chairman Yarmuth [continuing]. has expired. I now recognize
the gentleman from Texas, Mr. Flores, for five minutes.
Mr. Flores. Thank you, Chairman Yarmuth. I would like to
thank each of the witnesses for being here today.
By any number of metrics, our economy is really strong,
thanks in large part to the policies implemented by Congress in
2017 and 2018 and by the Trump Administration. The U.S. economy
is in the midst of its longest period of uninterrupted growth
in American history.
I will illustrate this by quoting from Jerome Powell, the
chairman of the federal Reserve Bank, who stated at the most
recent Open Market Committee meeting, ``Wages have been rising,
particularly for lower-paying jobs. People who live and work in
low and middle-income communities tell us that many who have
struggled to find work are now getting opportunities to add new
and better chapters to their lives. This underscores for us the
importance of sustaining the expansion so that the job market,
the strong job market, reaches more of those left behind.''
I couldn't agree more, but the truth is that the real
barrier to successful state-run programs is to serve--that
serve to sustain this current economic expansion is not the
lack of federal funding. Rather, it is burdensome federal
mandates that deny our states the flexibility and ability to
innovate.
So in this regard, in fiscal 2018 federal spending on major
health care programs totaled $1.2 trillion. About $380 billion
of that was spent on Medicaid. As all of us know, there are
several guidelines and requirements that states must abide by
when spending federal Medicaid dollars. So my questions are
these, and I would like to direct these questions to Secretary
Walther or Director Murnieks.
And Dr. Gordon, I think you mentioned the flexibility
challenge, also.
So the first question is, are there any reforms that
Congress could consider to give states more flexibility in
designing and executing health care programs so that they are
better tailored to the needs of local communities?
Secretary Walther, we will start with you.
Mr. Walther. First I would like to say that we are very
pleased with the amount--you know, the way it is working,
generally speaking. It is a critical part of our budgeting
process. In order for us to plan on a bi-annual basis like we
do in Arkansas, it is imperative that we have an idea of what
those--what that support from the federal government will be
over the next two years.
Having said that, there are some areas where it is
problematic. There is a process called the FMAP process, where
it is the state's relative proportion to the rest of the United
States. And it is a wealth index, so to speak. And that can--
that changes from time to time, and it changes the amount of
money that is supported by the federal government compared to
the state government. It is a percentage number, it is around
80/20 or, yes, 70/30, I mean. And----
Mr. Flores. If I can stop that for just a second.
Mr. Walther. Right.
Mr. Flores. So I--so the answer is yes, you need more
flexibility.
Mr. Walther. Yes, flexibility----
Mr. Flores. Let me ask you to supplementally give us more
information on that, if you don't mind.
Mr. Walther. Yes, sir, I would be glad to.
Mr. Flores. So I can get through the rest.
Mr. Walther. Sorry.
Mr. Flores. That is very helpful.
Director Murnieks, tell us about--does your state need more
flexibility in this regard?
Ms. Murnieks. Congressman Flores, absolutely. Ohio
currently, just in the Medicaid program, we have 18 different
federal waivers. There are 450-plus Medicaid waivers in place
throughout the 50 states. And I think the magnitude of the
waivers shows--that illustrates perfectly the restrictions that
we are under, that we need waivers, and all of the paperwork,
and all of the bureaucracy that goes with it----
Mr. Flores. It sounds like we are onto something here.
Ms. Murnieks. Just----
Mr. Flores. So, if you would----
Ms. Murnieks. Absolutely.
Mr. Flores. If you could supplement and give us more
information on that----
Ms. Murnieks. Yes.
Mr. Flores. And Dr. Gordon, did you mention something about
the need for flexibility when it came to state funding, as
well?
Dr. Gordon. Well, I was actually thinking of Medicaid as an
economic shock absorber. So the fact that the Recovery Act
added an increment in spending that was tied to local economic
conditions, I think, is something that could be made permanent
so there is more certainty for local--state and local
officials, if they see a big increase in enrollments, as they
did at the beginning of the Great Recession.
Mr. Flores. OK, great. Let me go to the next question. I
think this is important. I think all of you touched on this.
As you know, the federal budget process has been broken.
There, you know, hasn't been a budget passed in the last
several months. And then the federal funding was on again and
off again, and we had CRs. Can you please describe the
practical impacts of Congress failing to budget in appropriate
funds on time, in terms of making it difficult to plan and
implement your state budget?
Let's talk with--start with Director Murnieks.
Ms. Murnieks. Yes. Thank you, Congressman.
Mr. Flores. A real quick question--real quick answer.
Ms. Murnieks. Yes, it makes it very challenging. When we
came into office, when Governor DeWine came into office one
year and one day ago, we were in the midst of a federal
government shutdown.
Mr. Flores. Right.
Ms. Murnieks. And that made it very challenging.
It--we can, for a period of time, keep our programs
operating using state resources, but that--the time and effort
dedicated to keeping everything going so that the--Ohio's
economy and our employees and our staff can have stability is
extremely challenging.
Mr. Flores. Thank you. I would ask the rest of you to
answer supplementally, if you don't mind, after the hearing.
Thank you. I yield back.
Chairman Yarmuth. Thank you. The gentleman's time has
expired. I now recognize the gentlelady from California, Ms.
Jayapal, for five minutes.
Ms. Jayapal. Washington State, but I was going to say to my
colleague from Missouri that he could always move to Washington
or California. And we have Democratic legislatures and
Governors in both states. So thank you very much.
I wanted to start by just saying that federal government
spending is essential to a real partnership between states and
local governments and the federal government, and critical to
our ability to really bring our 50 states together and support
that partnership.
We had a budget hearing recently that the Chairman pulled
together that was around--with economists. And we talked about
the failed austerity measures in--that have been shown through
research to really hurt our country, and to hurt our people,
and certainly to hurt state and local governments. And so I
wanted to start there and perhaps direct this to Dr. Gordon and
Dr. Lambrew.
The past federal government austerity spending times, can
you give us a sense of how they have affected state and local
governments in a broad way?
Dr. Lambrew, perhaps specifically, with your portfolio.
You want to start us off, Dr. Gordon?
Dr. Gordon. Sure. People who look at the state-federal
partnership often talk about these ages of federalism.
So, for a long time, the federal government and states
basically operated independently of one another in this sort of
dual federalism.
Then there was an era of cooperative federalism, where the
federal government was expanding its role, but still
recognizing the strengths of state and local governments,
delegating about 9 percent of its budget to those governments
to carry out important functions like social services and
public works.
Then you saw a period of sort of proliferation of federal
grants, some retrenchment from that, consolidation of grant
programs, and then an era of decline in real per capita grants
going to state and local governments in the 1980's.
That has rebounded. state and local governments are now
getting on, as a whole, about 25 percent of their revenues from
the federal government. There are a lot more creative uses of
federalism, things like Race to the Top during the recession,
where the federal government leveraged funds to get state and
local governments to make certain investments in things like
information technology.
So there have been these various areas of federalism, and
it has changed throughout the years. There is nothing to say
that we are in the right place right now. But I think we are
learning from these experiments, especially things that are
undertaken sometimes during hard economic times, as you
mentioned.
Ms. Jayapal. Dr. Lambrew, you oversee a very important
portfolio, safety net portfolio. Tell us what happens when the
federal government cuts back, particularly in times of
recession, but really in both instances of growth and
recession.
Dr. Lambrew. Sure. And while I can't speak quite to my
experience in Maine in the last years, since our economy has
been good, and the federal government has not yet cut back on
funding, looking back I was in the Obama Administration when
2009-2010 hit. And so we worked hard to figure out, with our
state partners, how do we support Medicaid, federal financing
percentages, increases to target to unemployed states--or,
excuse me, states with high unemployment. But I would say we
thought, at the time, if we could make it permanent, then you
would actually end the uncertainty.
Fast forward. In the state of Maine we do have a Medicaid
contingency fund, in case, because we need to. We do think
through, if there is a downturn, do we have enough money for
TANF and the low-income supports. And we have to do that within
our own means, because there is not the automatic stabilizers
that Dr. Gordon talked about.
So we would prefer to be able to use the money we have
effectively to implement programs on the ground, and not have
to set aside money as much as we do, because there is not the
automatic response that the federal government is going to be
there for us.
Ms. Jayapal. Thank you. I want to go back to housing and
homelessness. This is something that our communities across the
country are struggling with. And we do have a lot of tools at
our disposal, including McKinney-Vento funds, CDBGs, low-income
tax credits, and, of course, HUD vouchers and public housing.
Mr. Poloncarz, could you talk to us? You called Community
Development Block Grants a vital lifeline that help communities
develop affordable housing and infrastructure. Tell us more
about why those funds are so needed in your community, and how
you have used them.
Mr. Poloncarz. Well, when we think about Community
Development Block Grants, they can range from very large
affordable housing projects in the city of Buffalo to, as I
previously said, clean water projects in a small little rural
community, where we may be assisting them to do repairs on a
sewage treatment facility. And it is the kind of things that
people don't necessarily think about government doing, but they
want government to ensure that it is there.
And so, when you talk about housing, every community in the
United states has a homeless problem. Thankfully, our community
doesn't have as much as some other areas. Maybe it is because
people just--it is tough to be homeless in Buffalo in the
winter. But we have had individuals die outside during winters
when they didn't have appropriate housing. We have homelessness
and issues associated with individuals in our rural community,
just like we do our cities.
And if we don't have the funds to help provide assistance,
not just through the county--because, remember, the county
sometimes is also a pass-through to a third-party not-for-
profit that is actually delivering the actual service to the
individual or the family. So if we were unable to do that, if
there was a shutdown, or there was a slowdown, or there was a
cut in those programs, we, the county, now have to make a
determination. Are we going to use our own funds?
Remember, out of my $1.8 billion budget, only $125 million
of that is discretionary. The rest is all mandated. So then I
have to make a determination. Am I going to cut other programs,
or am I going to raise taxes for this service which the vast
majority of the public doesn't even understand we provide? And
that is why it is important.
Chairman Yarmuth. OK----
Ms. Jayapal. Thank you, Mr. Chairman. I yield back.
Chairman Yarmuth. The gentlelady's time has expired. I now
recognize the gentleman from Texas, Mr. Roy, for five minutes.
Mr. Roy. I thank the Chairman. I thank all of the witnesses
for coming and taking your time out to be with us here today.
I have been intrigued by some of the language that I have
heard here today. A lot of my colleagues like to word--use the
word ``investment.'' It is one of those euphemisms that always
gives me a little bit of a smirk about where that dollar is
coming from. I heard a lot about a partnership between the Feds
and the state. I heard here about failed austerity.
Well, I would agree with failed austerity, because we are
sitting here with $23 trillion of debt piling up around our
ears for our kids and our grandkids. So, yes, any kind of
effort at austerity has indeed failed. We are currently racking
up roughly $110 million of debt per hour. So during this
hearing, congratulations, we are going to raise a--rack up
another $110, you know, $220 million of debt. That is what is
happening as we speak. Those are the real numbers. That is what
we are facing.
So what I am curious--as I look to my folks here testifying
from the perspective of states--I worked in state government. I
was the first assistant attorney general in Texas. I worked at
the Texas Public Policy Foundation, focusing on federalism
issues. I appreciate that states are here.
I think my question is, is when we are looking at states,
my question, for example, from the gentleman from New York, Mr.
Poloncarz, is there any federal restriction on the ability of
the state of New York to raise taxes or come up with revenues
to produce whatever the state of New York wants to do?
Mr. Poloncarz. I am not aware of any federal restriction.
The local governments in New York are under a 2 percent tax cap
restriction.
Mr. Roy. By the state of New York?
Mr. Poloncarz. Correct.
Mr. Roy. Right. So the state of New York makes its choices
about what it wants to do with respect to taxes, and how it
wants to spend its money, without any interference from anybody
in this body. Is that correct?
Mr. Poloncarz. I am not aware of any restriction on how
many taxes we can raise as a result of a federal program.
Mr. Roy. How many million people live in New York State?
Mr. Poloncarz. Well, that varies, but there is
approximately 1 million in my community, and I believe there is
about 16--well, 18 million, I think, in New York State. It is a
urban, suburban, and rural----
Mr. Roy. It might be a little bigger than that. But OK. So
there is a lot of people in the state of New York. It is a
full-functioning economy, they are able to produce revenues for
the state of New York by virtue of taxing their citizens in the
state of New York.
I think my question would be--is why are 300 people a day
moving away from New York City and the tri-state area? Why are
300 people a day flocking away from that area and moving to,
for example, in Texas, where we have 1,000 people a day moving
to Texas?
I would suggest, because of the laboratories of democracy,
we are able to see that individual states are able to create
systems and create environments in which they think will create
prosperity and growth and economic opportunity, and people are
flocking in droves to those places that are seeking to create
an environment where you can have economic growth and
opportunity.
I would ask if Mr. Walther, the gentleman from Arkansas, if
you might agree with that rough statement that I just made.
Chairman Yarmuth. The----
Mr. Walther. I would. Obviously, there are a lot of things
going on in Texas: no income tax on personal income, things
like that, weather--probably a weather difference. But Texas--
--
Mr. Roy. It is a factor.
Mr. Walther. Texas has become quite a state when it comes
to technology, and has brought a lot of people in. We compete
with Texas also in Arkansas, so I have seen it from a little
north of you.
Mr. Roy. Yes, sir, you do, indeed. We could talk a little
football, but we haven't had much to talk about lately in
either state.
But here is one thing I would note. I mean I am just
looking--I pulled up a CNN list here. New York comes in No. 1
in the overall taxation burden on its folks. I guess my point
here is we have got folks here talking about how important it
is for these programs, for states to get money from the federal
government.
Well, there is no more room in the inn. We have $23
trillion of debt, $100 million of debt an hour. I think if the
states are looking to the federal government to be fiscally
responsible and to solve your problems, and to create the
programs that you want for the citizenry, well, you should go a
different direction.
States need to come up with ways to solve their own
problems. States, when they do that, do that much more
effectively than people governing from Washington, trying to
make decisions for 330 million Americans.
Right now the state of Texas loses almost $1 billion a year
in dollars that we put out for transportation dollars for the
dollars we get back. The state of Texas has a lot of
transportation issues. I would like to get that money back. I
would like the dollars to stay in the state of Texas.
I would like the federal government to focus on the one
thing it should do, which is securing the United States. Texas
deals with the burden of a broken border, where we have 900,000
people who have been apprehended in the last year, in the last
fiscal year, coming into, heavily, Texas.
When is this body, this Congress, going to do its job, its
constitutional duty, to defend the United States of America,
secure the borders so that Texas and border states don't have
to bear the burden of a failure of this body? When will this
body embrace some of the reforms we have talked about here
today to be responsible? And when will states recognize that
coming to Washington for more money is ignoring the very
responsibility of states to do what they do best, which is take
care of people at the state and local level?
I thank the chairman.
Chairman Yarmuth. The gentleman's time has expired. I now
recognize the gentleman from New Jersey, Mr. Sires, for five
minutes.
Mr. Sires. Thank you, Mr. Chairman. You know, over the
years I have put together a few budgets. I have been a mayor, I
have been a speaker of the New Jersey Assembly. So I think a
few budgets have come along my way.
And talking about uncertainty, I think that is, obviously,
one of the biggest problems, especially at the local level. You
know, you do something today, and they talk about all these
cuts, and it is gone tomorrow. Samples like the cops program.
You hire cops, next year it is gone.
Then we pass things in Washington requiring certain
uniforms for fire departments and certain things. That is a lot
of money that comes in. As more communities want to buy a
pumper, it is $800,000. That is not to mention a ladder truck
that is so expensive.
So when we talk about uncertainty and partnership, the
government certainly has a role to play, because communities
just cannot handle these kind of things to secure--for them to
be secure and be safe.
So when I hear all these cuts--the CDGB (sic) program, you
mentioned it, sir. You know, I mean, that is the lifeline of
our communities. You know? And then not to mention charity care
for hospitals.
I mean I could go right down the line of some of the things
that, when they talk about cutting, that puts pressure on the
local individual who is already over-taxed.
And not to talk about infrastructure, you know, in New
Jersey we have this tunnel that we need to rebuild. The
northeast region produces about 20 percent of the GDP of this
country. We have a tunnel--we have two tunnels 100 years old.
We have a bridge that, if the lifeline of these tunnels, the
commuter--that is over 100 years old, and it doesn't lock
properly. You need somebody with a sledgehammer to line it up
properly.
I don't think people realize the impact that, if these
things go, that it is going to have on the entire country.
Because the region just generates so much money for the
government.
New Jersey, New York, Connecticut, we are all sending
states, in terms of sending money to the federal government.
And we don't get money back like we sent. I think New Jersey--I
think it is, what, 28 percent of what we get from the federal
government?
So--and I am a firm believer of this partnership with
certainty. If we can bring it to a certain--to a degree.
We talked about tax credits. Everybody talks about
affordable housing. But the only way that you can build now,
not just affordable housing, but senior citizen housing, is
through tax credits, because there is very little money.
So if you take away tax credits, where are these
communities going to find money to build a senior citizen
building? If you take away all this money, it falls on the lap
of the community that does not have that money. So there are
certain government programs that are certainly needed for
communities to be able to deal with the situation.
I come from a very urban district. The town that I live
in--I always say this--it is 1 square mile, and it has got
52,000 people in it. I represent Hoboken, New Jersey, one mile
square. It has got about 53,000 people in it, not to mention
Jersey City, which is going to become the largest city in New
Jersey with the next census.
So these urban areas are under more pressure than some of
these other parts of the country. And they need more.
Unfortunately, that is the reality of it. They pay more, but
they need more. So when we talk about cuts and some of the--
and, quite frankly, some of the legislation we pass here, you
know, sometimes the impacts on these communities, it is really
tough.
So all I can say is a partnership is necessary to get
these--some of these projects through, to continue to generate
income for the federal government. If you stop people from
commuting to New York, you are going to lose money in the long
run, because New York is the engine that generates a great deal
of money that goes to the federal government.
I guess I don't have a question, but I just give you a rant
and rave here for going through so many years of putting
budgets together.
[Laughter.]
Mr. Sires. You know, it was never easy.
Chairman Yarmuth. The gentleman's time has expired. I now
recognize the gentleman from Georgia, Mr. Woodall, for five
minutes.
Mr. Woodall. Thank you, Mr. Chairman, and thank you for
holding the hearing. I appreciate you all being here.
Mr. Poloncarz, you referenced transportation infrastructure
spending. I serve on the Transportation Committee, as well. We
actually don't have any problem spending the money, it is
raising the money that we have a problem with. The fourth
quarter of last year, the federal government spent $1.16
trillion. That is a 7 percent increase. We brought in a little
over $800 billion, that was a 5 percent increase in revenues.
But you do that envelope math, you find out we spent about 43
percent more than we brought in. And I am guessing any of your
jurisdictions, if we freed you up to spend 43 percent more than
you are bringing in, you would be wildly successful, too.
So what I want to find out from all the local expertise is
you have talked about flexibility, which is taken away when
money comes from the federal government. You have also talked
about uncertainty, which is created when the federal government
hits our speed bumps. When we talk about block grants, in
particular, we are trying to create some certainty here.
I don't think anyone would deny in a time of recession, in
a time of natural disaster, as many of you mentioned, there is
a huge role for the federal government to come in and help our
localities. But that is not where we are right now, today,
while the federal government is spending 43 percent more than
it is bringing in. We are at a time of great economic
prosperity in our localities.
So tell me why now isn't the right time to have some of
these block grant conversations that creates federal government
budgeting certainty, and stipulating that in those times of
recession, those times of crisis, the federal government will
need to step up and be a better partner than--can I start with
you, Dr. Lambrew?
Because we bragged so much about your risk pool there in
Maine, and there is so much that we can learn from your
jurisdiction, from Mr. Poloncarz's jurisdiction, tell me why
now isn't the right time for us to bring some federal
certainty.
Dr. Lambrew. So I would argue that having--knowing at the
state level that if there is some unexpected costs, and
recessions are one source of that, they are not the only one.
So, for example, we know that about a decade ago a new drug
came onto the market that cures hepatitis C, cures it, but very
expensive. Without having some ability to have some additional
federal funding to match--not to just 100 percent pay for that
new drug, but to match it was important.
Louisiana had Katrina. Their population increased. Natural
disasters is a cause.
So we have multiple reasons for uncertainty----
Mr. Woodall. Stipulating that all of those things are
true----
Dr. Lambrew. Correct.
Mr. Woodall. If I agree to be a good federal partner with
you on those unexpected occurrences, why is it unreasonable to
ask you to be a good state partner to me by giving me a certain
expenditure for normal expenditures.
Right now the skin in the game is just out of whack. We saw
it in Georgia, where we created a provider tax to say, well, we
will just have a provider tax. That way we will get two-thirds
more from the federal government than what we were getting from
them before, right? We are all clever folks at gaming the
system. We rob banks because that is where the money is.
I want to be a good partner, and we are not now. And then
that is why you all came to town, because we are not a good
partner to you when we get into federal government shortfalls.
But if not today, when is the day to have the conversation with
my state and local partners about capping my federal government
involvement in your communities during a time of normalcy?
Dr. Gordon pointed out that 90 percent of education in my
community and your communities is funded by you all. And yet my
board of education spends a lot more time talking to me about
federal restrictions than they do talking to local families.
Secretary Walther, you know, Arkansas and Georgia, we have
got a lot in common with one another. I don't want to be a bad
partner. I don't want to shirk my responsibility. I just grow
weary of, ``If only the federal government was doing more.''
Well, I am doing so much more that I am doing 43 percent
more than the revenue that I am bringing. And guess what? When
I go to get that 43 percent of the revenue, it is going to be
high-income jurisdictions, like New York. It is going to be
successful jurisdictions like California. The taxpayers are
going to be the taxpayers.
Mr. Secretary?
Mr. Walther. One observation from what you are saying is
there--right now we are at a certain place in the budgeting
process. We are--you know, the states and local governments are
receiving a fairly known amount. If we start making
dislocations of that, it may, on a large basis, be--not mean
anything to you when you are looking at it from the very top.
But if you are at the bottom, where the money actually gets
distributed and affects the citizens of a community, and they
lose that, it could be devastating.
So it is important that we work together, that we look
eyeball to eyeball, and understand--you understand our issues
and we understand yours, and we work out a solution. It is--
that is the way it has to be done.
Mr. Woodall. The Chairman knows, from our work on the Joint
Select Committee last cycle, there is shared understanding that
the piper is going to come to be paid, and those folks that you
point out, Mr. Secretary, that can handle that dislocation the
least, are going to be the ones who are affected the most when
that day comes. And I just don't want us to miss this
opportunity at the top of the economic cycle to solve some of
these problems.
I appreciate your indulgence, Mr. Chairman.
Chairman Yarmuth. Absolutely. The gentleman's time has
expired. I now recognize the gentleman from Virginia, Mr.
Scott, for five minutes.
Mr. Scott. Thank you, Mr. Chairman. Do you have the charts?
Thank you.
[Chart.]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Scott. Here is just a couple of charts. We have heard
all about the--is it going to go in?
Can we go to the next chart? Well, let me go back to this.
This, if it was filled in--can you go back one? If it was
filled in, it would show the last three years under Trump is
189,000 jobs per month. Under the last three years of Obama,
224,000 jobs. And you could see in the jobs, when the Obama
Administration proposal went in 2009, we were in the bottom. We
weren't--we were losing a lot of jobs, and we recovered. And
you would also see that there wasn't a wrinkle when the Trump
Administration proposal went in. Next chart?
[Chart.]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Scott. This shows unemployment rate. At the top of--the
worst unemployment was the Obama Administration economic
proposal. And as you go down, you don't see a wrinkle anywhere
to suggest that the Trump Administration had anything to do
with it.
Mr. Scott. And the final chart shows that, going back into
Nixon, Ford, every Republican, without exception, ended up with
a worse deficit position than he went in with. And every
Democrat, without exception, ended up with a better deficit
situation than they started off with.
[Chart.]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
You know, just to get--as we discuss who is in--who is
getting credit for what, we just like those on the table. Thank
you.
Ms. Lambrew, Maine expanded Medicaid, 43,000 people got
insurance. Can you tell us what effect that had on the state
budget?
Dr. Lambrew. Sure. We are in the process of doing that kind
of quantification. It has just been about a year. But we expect
that, in the two-year budget cycle that we operate, that we
will be able to get over $700 million more in federal funding
to invest in opioid use reduction treatment. For example, one
out of 10 expansion enrollees has gotten some treatment for
opioid use reduction, 16,000 people got mental health treatment
in the last year, over 3,000 people got a cancer screening,
which we think will have a long-run savings to the state and
the federal government, as people get care detected earlier.
We also know our hospitals are beginning to experience
declines in uncompensated care, which, at the end of the day,
is good for all citizens, as private premiums come down with
less of a cost shift in the state.
So we are quite excited about the early results of our
Medicaid expansion----
Mr. Scott. What about state revenues? With all the
additional spending are you getting any additional revenues,
tax revenues?
Dr. Lambrew. So we don't single that out again. I can say,
generally, that the revenue forecast for the state of Maine has
been good. It got revised upward in December, so the revenues
in the state of Maine are strong, at the same time as the
Medicaid expansion has----
Mr. Scott. So the expansion got in more federal money, and
probably increased revenues as a direct result of expanding
Medicaid and covering 43,000 people?
Dr. Lambrew. There was certainly no decline in revenue. At
the same time, revenue was going up in that period.
And I will note, going back to what happens in a bad time,
the Medicaid expansion is exactly the right policy you want to
have in effect, because that is covering--as one of my
colleagues said--the working poor. Should they lose their jobs,
they could, without the Medicaid expansion, lose their health
care, put strain on hospitals, put stress on local communities.
With a 90 percent federal matching rate for that group that is
most vulnerable to expansions, I would argue, is one of the
better recession-proof policies that we have in the state of
Maine.
Mr. Scott. Thank you.
Secretary Walther, you mentioned your levee situation. Have
you--and, obviously, if you have better levees when storms
come, you will have less damage. Have you projected whether or
not the cost savings and reduced damage due to the levees would
be more than or less than the cost of constructing the levees?
Mr. Walther. No, sir, I do not have that information.
Mr. Scott. Do you--is there any way that you can build the
levees without federal support?
Mr. Walther. There is. It will take a lot longer period of
time. But I am sure it would be possible. A lot of that is done
through local levee boards that work to generate revenue on a
local basis to complement the money we get from the federal
government, too.
Mr. Scott. OK. Ms. Gordon, you mentioned some of the things
that we can do, counter-cyclical spending. We have counter-
cyclical spending with food stamps and unemployment benefits.
What should we be doing before a recession starts to be ready
for a recession?
Dr. Gordon. Thank you for the question, Congressman. I
think that people often talk about automatic stabilizers in the
tax code, federal tax burdens that go down automatically when
people earn less income, or social safety net programs, as you
mentioned. But I think one aspect that gets overlooked is this
counter-cyclical assistance to state and local governments,
which, as the Congressman mentioned, you know, do have skin in
the game, and they are providing these services as soon as they
are demanded. There is not always necessarily a backstop from
the federal government.
Chairman Yarmuth. The gentleman's time has expired. I now
recognize the gentleman from Pennsylvania, Mr. Meuser, for five
minutes.
Mr. Meuser. Thank you, Mr. Chairman. Thank you all very
much for being here with us today.
We are certainly experiencing quite an economic boom. And
economic booms, job creation, is the number-one revenue
generator for governments. The economic boom is due to a number
of things, but the primary factors are certainly a less
regulated economy.
Without a doubt, the tax cuts--I think the tax cuts
exceeded anyone's expectations, even the highest of
expectations, by putting more money in people's pockets, and in
small business, and in large businesses that employ millions,
of course. Those companies are reinvesting, and people have
simply more money to spend how they see fit. And the multiplier
effect takes place far more effective than any targeted
spending, stimulus type of spending from the federal government
or any level of government.
Trade is a huge factor. It completely opens up new markets
for our--best products in the world are made in the U.S.A.--
products and farm goods.
Low interest rates play a very big role, and that is the
case.
And having low costs and dependable energy at our
disposable--at our disposal, which is not affected by
geopolitical Middle East and military events.
So, anyway, we also have something known as the Tenth
Amendment, where the powers not delegated to the United States
by the Constitution, nor prohibited to it by the states, are
reserved to the states and to the people.
So, all that being said, I use a very simple example. Think
of your traffic lights in your home town. Imagine your federal
government was in charge of your traffic lights. First of all,
if there was ever a problem, it would take a while for them to
get fixed. Whether or not they worked right or not would be
relatively up for grabs. And they always seem to work extremely
well, so thank goodness we are smart enough to have where the
funding takes place for such things as close to the scene where
it is needed as possible, where the proverbial rubber meets the
road.
I was revenue secretary for the Commonwealth of
Pennsylvania for four years. And in one of our budgets we
initiated block grants to counties. The block grants, depending
upon the funding, were anywhere from a 15 to 20 percent
reduction from the previous year. Initially, there was a lot of
squawking. How can we do that?
Then we asked the counties what they thought: 66 out of 67
counties felt they could do a far better job with anywhere from
15 to 20 percent less from the state government, and it worked
out very well.
So I am going to ask you about block grants related to
Medicaid, certainly education, transportation. And, you know,
under Obamacare there were some waivers given, of course, to
states related to health care.
So Mr. Walther, I will start with you. What are your
thoughts on the effectiveness of federal block grants to the
states?
Mr. Walther. From our point of view, they are much easier
to administer and to get the dollars to those who need it. In
other words, you--we get a block and then we determine, on a
local level, what--where those dollars go, based on the
requirements that the block grant actually has in it. So it is
a great way of doing it.
And some places we get that, and some we don't, but it
would be a preference, I guess from the state's point of view,
to--the more we can do that, the better it is in administering
and getting the dollars to those who need the money.
Mr. Meuser. Great. Ms. Murnieks, related to Ohio and your
experience?
Ms. Murnieks. I would concur that the more flexible we can
be in our funding and how we are able to dedicate the funds to
the important programs that are going to have the biggest
impact locally, the more flexibility that could be provided in
that, whether it is through block granting or another
methodology, would be appreciated in Ohio.
Mr. Meuser. Great, thank you. And let me ask you this, Ms.
Murnieks, while you are speaking there. What does the federal
government do well for Ohio, for the states? What kind of
synergies--what funding initiatives and cooperative efforts are
effective, and not only appreciated, but delivered a good
return on investment?
Ms. Murnieks. Well, I can say that when we look at the
Medicaid program overall, that has enabled us to address the
opioid addiction program and the drug problem that we have had
in the state of Ohio. I would say that more flexibility would
be appreciated, but that partnership has worked well in Ohio.
Mr. Meuser. Thank you.
And, Mr. Chairman, I yield back.
Chairman Yarmuth. The gentleman's time has expired. I now
recognize the gentleman from Michigan, Mr. Kildee, for five
minutes.
Mr. Kildee. Thank you, Mr. Chairman, for recognizing and
for holding today's hearing. This is a subject that I spent a
great deal of my career before coming to Congress working on,
particularly in terms of federal investment and the way the
federal government can support community and economic
development.
I mean, after all, the best way to provide for sustainable
communities is to make sure that they have vibrant economies.
And the federal government does have a role--can have a greater
role, I think, in supporting that.
Our states do rely on significant assistance from the
federal government. The data that has been discussed in this
Committee makes that point very clear. But those state programs
and state governments' ability to be more stable allows states
to invest in cities and towns, as well. So reduced federal
support has a cascading effect not just on state budgets. But
what we have seen is that states that are under fiscal stress
tend to pass their stress on to local governments, which are
creatures of state government.
Add to that the reduction in the commitment that this
federal government has made directly to community development
through programs like--and, Mr. Poloncarz, you mentioned the
community development block grant program. This is one of those
programs where local priorities can drive funding decisions.
But, let's face it, I mean, we just haven't provided the
support at a scale equal to the need in many of these
communities. Those cuts in community development block grant
support has a real impact on basic elements of civil society in
chronically distressed communities.
So perhaps Dr. Gordon and then Mr. Poloncarz, if you might
discuss maybe in a little greater detail what you think the
needs--CDBG being one way to address it, but in these left-
behind places, Dr. Gordon, that you referred to, these
chronically distressed communities that seem to be immune to
up-cycles, there was a conversation about counter-cyclical
investment. There are communities, a whole subset of American
communities, that are completely immune to up-cycles.
I happen to represent a string of those older, industrial
communities. I know you have all heard me talk about my home
town of Flint. It is the, you know, I think the case study of
what happens when we see chronic distress.
Could you comment on where you think the federal
government's role could be enhanced, each of you, particularly
for these chronically distressed communities?
Dr. Gordon. So I think the federal role is typically
thought of as addressing these spillovers, so the Congressman
from New Jersey mentioned that you have bridges that connect
states that people use every day to go from where they live to
where they work. But there are also externalities from letting
places fall behind, not to mention that there is just a sense
that, as Americans, we want to provide a certain decent minimum
for everyone, a certain level of access to goods that are
necessary to live a healthy and productive life. So the federal
government has a role in helping these places that are facing
chronic challenges that come from things like trade and
external economic events.
One point that I tried to make in my testimony is that the
federal government has an arsenal, really, at its disposal
already in the $700 billion that it spends annually in federal
grants, and that those grants could be better targeted to
places that are in need. There have been experimentation during
natural disasters, during economic disasters to tweak these
formulas to make them more responsive to differences in local
need and local cost and local fiscal capacity.
In my own work I have found that most states face a gap in
what they could raise in revenues and what they would have to
provide in spending to meet national benchmarks. federal
governments offset those gaps in about half of all states, but
gaps remain in many, many states. And so, from my perspective,
I think the federal government should look at the tools that it
already has, and try to use them more effectively.
Mr. Kildee. Mr. Poloncarz, you play a role in your
community similar to one that I once played. I wonder if you
might comment on the effective for your community, but also the
other places that you are familiar with around the state that
may be facing chronic distress.
Mr. Poloncarz. Well, the problem with chronic distress,
Congressman, is it is chronic because you have just a never-
ending cycle. You lose businesses, you lose tax base, you lose
jobs, people move. What ends up happening, you still have the
same need for the people that are left in the community, but
you have less revenue now to pay for it on the local level.
And we see that in large, urban centers, like the city of
Buffalo, which is seeing a tremendous revival. But depending on
how you quantify it, it may be still considered the third or
fourth poorest city in America. And the same thing in rural
communities, where I talk to town supervisors and they have
some of the same issues and same problems.
And on an annual basis, our consortium comes together to
determine how we are going to spend Community Development Block
Grants, and it is never enough. And we are then basically
thinking, OK, what did we do last year, what did we do two
years--because we helped that community out three years ago, we
helped this community out two years ago. Now who can we help
out this year, so that it is fair?
But everyone sits at the table and says, ``We could do so
much more if we had additional revenue to assist us in those
projects,'' and it really matters in a community where they
cannot generate more revenue because they have a declining
population and a declining tax base.
Mr. Kildee. Thank you all very much, and I yield back.
Chairman Yarmuth. Yes, the gentleman's time has expired. I
now recognize the gentleman from South Carolina, Mr. Norman,
for five minutes.
Mr. Norman. Thank each of you for coming here.
Let me mention one thing about the jobs numbers that I saw
up there. I had a constituent call me back during the Obama
years, and was questioning me on the jobs now versus the jobs
created then.
And so I delved into it. The jobs created then, the
difference was it was government jobs. It was for more
bureaucracy. What this President has done is create private-
sector jobs. Ask any business. They will tell you they are
investing in their business, they are putting equity in, they
are excited. And it is from cuts in regulation, not expanding
regulations. That is the main--one of the main differences. For
every one being proposed, this President has cut 15 to 20. He
is a businessman.
Second, I would like to say that one thing both sides can
agree on is infrastructure: roads, streets, bridges. The issue
is--and Mark, you mentioned it--is the money is never enough.
You can't have enough money, and--which comes to my question
for each of you.
I am a contractor. I am from the private sector. I have
seen firsthand where, with the same contractor, him charging
$400 per square foot for pavers, he is charging me 110. And he
is making money at 110. I said, ``Where is--explain this to
me.''
He said, ``It is government.''
What checks and balances can we put in play so that the
block grants that you support will--the money will go further,
and that it will not be taken advantage of?
And I will start, Doctor, with you.
Dr. Gordon. Yes--oh, sorry.
Dr. Lambrew. There are two doctors.
Dr. Gordon. Which doctor? Yes.
[Laughter.]
Dr. Gordon. So I think, since the beginning of time,
Governors have come to Washington and said that what we really
need is more money, or the same amount of money with fewer
strings attached. And from the federal government's
perspective, of course you want to limit budget exposure, and
you want to have restrictions on gaming and manipulating the
system.
I would just argue that there is a cost. As an economist,
we are always talking about tradeoffs. And so some of these
maintenance of effort requirements, matching requirements,
reporting requirements, basically, you know, inhibit states
from innovating, and also might get in the way of the aims of
the program in the first place.
Mr. Norman. You want me to tell you what cured it in the
situation that I just gave you? Competition. We got contractors
from out of South Carolina that were willing to come in here.
You had such a difference. Competition is where you have the
dollars go further. And I think both sides can agree that is a
good thing.
Doctor?
Dr. Lambrew. And I would just add I--that is what we have
been doing in the state of Maine. We work hard on competitive
procurement, to make sure that we are really trying to look out
to see who can do it best, highest quality for a good price.
But I would note that we should look hard at the
regulations that have been coming out recently, because, while
there may be fewer of them, they are often times limiting state
options. For example, two regulations this year for the SNAP
program would limit state choices.
In the state of Maine we would have to conform to standard
utility allowances that are more national. That would mean a 14
percent cut in our state that has high utility costs because of
heating in the northern part of the state. We would have
limited eligibility in what is called broad base categorical
eligibility: 44,000 people in Maine could lose eligibility
because state flexibility is taken away. And I mentioned this,
Medicaid financial accountability regulation. That would affect
all states' flexibility about how they have, over years, funded
their state programs and paid for their hospitals.
So I think we ought to be precise when we talk about
regulatory burden. There may be fewer regs, but some of the
regs that we are seeing would actually go backward, in terms of
supporting states.
Mr. Norman. And this is what I would ask you to do. You
put--like you put a balance sheet, put on the things that the
regulation is supposed to provide versus why you think it is
not there.
And also, all--each one of you all are at a good vantage
point to offer cuts, as well as things that needed to be
changed. And nothing lasts forever. Our family budgets,
business budgets, are modified every 30 days. So to have things
in place that aren't sunsetted makes no sense to me.
Mark?
Mr. Poloncarz. I certainly agree with a number of your
points. One of the things that we certainly have, and
especially when it comes to transportation, that is implemented
in every project are requests for proposals, and taking the
lowest responsible bidder. I have seen the bids come in and
scratch my head and seen how they are so out of numbers. But
then you go with the lowest responsible bidder. It works in
certain areas, it may not work in other areas.
For example, in the Medicaid program we know that there is
many more people who are now on the program. In Erie County
alone it is approximately 80,000 more since the Affordable Care
Act. But we haven't seen an increase in some of the dollar
values associated with the age groups, because it is the
individuals 65 and older, and end-of-life care and nursing care
that are driving the costs associated with it. And when you
have a country, so to speak, where we are trying to make people
live longer, and we have been able to reduce the costs and
ensure that we are providing health care for youths and
families, but when we see this dramatic increase in costs with
the individuals for end-of-life care and nursing care at the
same time the number of enrollees goes down, I am not certain
how we control that aspect of it, because we all want to live
longer lives.
Mr. Norman. Transparency. One of the big things is
transparency, and having a gatekeeper that has no interest in
it going up or down, that knows the system. That is the best
way that I know to do it.
Larry?
Mr. Walther. Just a----
Chairman Yarmuth. The gentleman's time is--go ahead and
finish the question. The gentleman's time----
Mr. Walther. Just a quick comment. What the states need to
do is still have accountability with the spending of the money,
and hopefully--not hopefully--when we should have more savings
up front to offset the cost that might be incurred on the end
where you have the accountability.
Chairman Yarmuth. The gentleman's time has expired. I now
recognize the gentleman from Nevada, Mr. Horsford, for five
minutes.
Mr. Horsford. Thank you very much, Mr. Chairman, for
holding this hearing to discuss the important topic of federal
investments and what they mean for our states.
As we await the President's Fiscal Year 2021 budget
blueprint, it is important for us to remind the President of
all the good that federal investments bring to our states and
local communities, its families and workers.
Nevada is one of the few states that meets every other year
in our legislature, and is on a part-time schedule. So it is
important that we have budget certainty. And that includes
certainty for what money we receive from the federal
government. Like many of the experts on the panel and some of
my colleagues, I previously served in the state legislature,
and was the senate majority leader not so long ago. And it was
during the time when we faced our state's worst budget crisis,
during the Great Recession. We actually lost nearly a third of
our state's revenue.
Nevada's budget deficit, as I said, was one of the worst in
the nation. Our unemployment and home foreclosure rates were
among the country's highest. Fortunately, the Obama
Administration signed into law the American Recovery and
Reinvestment Act of 2009, which provided $1.5 billion in direct
aid, including funding for our schools, for states' maintenance
of effort, as well as Medicaid assistance, as well as other
competitive grants that collectively created and saved nearly
34,000 jobs in my state.
Today we are one of the strongest economies in the nation,
with record job growth since 2010, including small business
creation, especially for women of color, and an increased
housing appreciation.
Additionally, Medicaid expansion in 2014 provided new life
to so many Nevadans. Nevada was one of the first states to
expand Medicaid under the Affordable Care Act, and I give
credit where credit was due. I had the opportunity to work with
then-Republican Governor Brian Sandoval. He was the first
Republican Governor in the country to enact Medicaid expansion.
From that we now have 630,000 Nevadans currently on Medicaid,
including children, pregnant women, seniors, and individuals
with disabilities. And Nevada has increased Medicaid enrollment
from 2013 to May 2019 by 90 percent. We are second-highest
percentage increase in the U.S., second only to the Chairman's
great state of Kentucky.
Well, despite all of these gains, and the fact that we have
been able to cut the rate of uninsured in our state,
particularly among children, in half, under this Administration
the President said when he was running for office--then
candidate--``There will be no cuts to Medicaid'' in 2015. And,
lo and behold, he sent us a budget proposal last year that
would have cut Medicaid spending by $1.5 trillion over 10
years. Nevada would have been one of the most hard-hit states
as a result of that proposal, and I am glad that this Congress
rejected his budget blueprint and passed an alternative.
Since I am already familiar with how state and local
governments are impacted by federal investments, and I believe
that all of us should be arguing for more resources into our
states, not less--I don't quite get my colleagues who want to
get less money to their constituents for schools and health
care and small businesses. I want to get my state's share of
the money that we send through taxpayer resources.
So, Dr. Gordon, can you explain to me how prepared are
state and local governments for a possible recession in the
future? How can the federal government help states and
localities prepare?
And all things go up. Our economy is good. I am rooting for
a good economy. I want successful small businesses and job
growth. But we also know the trajectory, and we have to be
prepared for when the economy is not as strong. And there are
levers that the federal government can deploy. So can you speak
to those, please? Thank you.
Dr. Gordon. Yes. I just want to say, of course, you know,
recession does not appear to be imminent. However, states are
very well prepared. Their rainy day balances are at an all-time
high of 8 percent of general funds. As you know, credit rating
agencies do various stress tests of state revenues and spending
programs. And most states tend to pass those tests quite well.
The issue is that states had healthy rainy-day funds prior
to the last recession, and nothing really could have prepared
them for a revenue drop on the order of 30 percent, and
increasing demands for public programs. So it is great that the
federal government stepped in and did so quickly with the
Recovery Act. What I am concerned about is that we don't have
an automatic response ready right now. We have to wait for
discretionary action. And, in fact, things that are done in the
heat of the moment might not be the best policy.
Chairman Yarmuth. The gentleman's time has expired. I now
recognize the gentleman from Texas, Mr. Crenshaw, for five
minutes.
Mr. Crenshaw. Thank you, Mr. Chairman, and thank you,
everyone, for being here.
You know, there is no debate over whether or not there
should be federal support to the states. It might be framed
that way sometimes, but that is not the debate. The debate is
over how efficient it is and how sustainable it is, and what
makes sense at the state level, and what makes sense at the
federal level. And that--there should always be a debate about
that.
You know, there was a question proposed of why wouldn't we
always ask for more money for our constituents. Well, the
reason is because we want to be good stewards of all taxpayer
dollars, and we want a system that is actually sustainable.
Sustainability is certainly a goal. Of course I ask for money
for my constituents. But I also know that my constituents voted
to pass a $2.5 billion flood bond paid for by their own tax
dollars.
If I am going to ask for flood mitigation funding from the
federal government--and you bet that I have--then I know that
we also need to match it. And there has to be a good
relationship between the state and the federal government.
There has to be a balance.
The notion of flexibility has come up quite often, and that
seems to be some bipartisan agreement there. So I want to ask
for some examples from everyone on what kind of federal--give
me some examples on federal mandates that have either cost your
state more, prevented innovation, or reduced efficiency.
And we will start with the ma'am from Ohio. Thank you.
Ms. Murnieks. Sure, thank you. I will go back to--my last
job prior to this was as the chief operating officer for the
Ohio attorney general's office when Governor DeWine was
attorney general. And an example that frustrated me in that
role was that we were continuing to receive federal grants for
marijuana eradication, when we were having Ohioans killed by
the opioid crisis. And we didn't have the flexibility to re-
direct those funds.
Mr. Crenshaw. Wow.
Ms. Murnieks. So I think that is a great example.
There was a question earlier about if we have flexibility,
how can we have accountability. I think the best accountability
is to focus on results. And in Ohio we are achieving results.
We created 10,000 new private-sector jobs this year. Small
businesses are growing. The majority of the folks working with
our small businesses right now are actually women creating
small businesses for the first time ever in Ohio. We are seeing
more venture capital investments. Innovation is up. And we
created a new opportunity zone tax credit in Ohio that mirrors
the federal opportunities, so that we can drive more funding--
--
Mr. Crenshaw. In addition.
Ms. Murnieks [continuing]. into those areas. So those are
some of things----
Mr. Crenshaw. Since we are on Ohio, we have problems in
Texas with disaster relief funding being mired in a lot of red
tape. Do you have the same issues in Ohio?
Ms. Murnieks. We absolutely do, Congressman. One of the
things that I have on my white board in my office as issues to
address is the complexity of disaster recovery funds. The--we
had some tornadoes in Ohio coming through the Dayton area
earlier this year----
Mr. Crenshaw. Has there been any official proposals by
Ohio? In Texas we had a long land commissioner's report on
that.
Ms. Murnieks. We don't have any official proposals yet, but
it is a----
Mr. Crenshaw. Send them our way, if you----
Ms. Murnieks [continuing]. an issue----
Mr. Crenshaw [continuing]. if you develop one.
Ms. Murnieks. Absolutely, we will, thank you.
Mr. Crenshaw. And will the rest of the panel please answer
the question? Thank you.
Mr. Walther. For--I don't have a lot of experience in this
area. The most recent one is the--are the floods that occurred
in----
Mr. Crenshaw. It doesn't have to be disaster relief-
related. We are still on these general examples.
Mr. Walther. Generally speaking, when you are working with
the Corps of Engineers and FEMA, they already have these rules
and regulations that are in law that make it difficult to
secure dollars and assistance. Now, we are working through
that.
I will--on the other hand, when we were going through
these--this difficult time this year, they were there, giving
us advice and assistance in that way, looking at the levees,
looking at the compromising of the levees. So they played a
great part. But from a financial side, it is a long-term
process to get money for levees when it comes to the federal
government. Thank you.
Mr. Poloncarz. Congressman Crenshaw, I think the original
question was with regards to the federal mandate's cost. Well,
it is not so much it is costing more, it sometimes is the
complexity associated with it and the timeline delays. We do
the best that we can to implement policies, but we are often
dealing with knowing that we are not going to get funds for
three, four years out, even though they sometimes are needed
immediately.
So it--I don't know if it is so much driving increased
costs, at least at the local level in my county and upstate New
York counties, but it is knowing that we could always--the
programs are such that we are depending on the funding, and
often the funding for the projects that we need them for,
whether Community Development Block Grants, water, clean water
programs, or so forth, aren't going to come for years.
Mr. Crenshaw. Thank you. I am out of time. I yield back.
Thank you, Mr. Chairman.
Chairman Yarmuth. Thank you. The gentleman's time has
expired. I now recognize the gentleman from Massachusetts, the
Vice Chair of the Committee, Mr. Moulton.
Sorry about that. Off my game here. I recognize the
gentleman from California, Mr. Panetta.
Mr. Panetta. No, no, no, always on your game, especially
being from Kentucky. Thank you, Mr. Chair, I appreciate that.
And, ladies and gentlemen, thank you for this opportunity
for us to talk to you, and for your participation, as well as
your preparation in being here.
My name is Jimmy Panetta, I come from the central coast of
California. And as you have probably heard, and as you know,
California pays more in federal taxes than they receive in
federal spending. Actually, 30.7 percent of our state's budget
comes from federal funds.
Now, obviously, California, being as large as it is,
population-wise, geography, as well as the economy, I think
that is understandable. However, we do rely quite a bit on
federal funding for the basics, be it transportation, be it
environmental infrastructure, be it health care, be it
education, and, of course, emergency services and disaster
response.
Yet, despite the importance of supporting state and local
governments, I think what we are seeing is that this
administration has pursued policies that have sort of left them
out to dry with the 2017 tax bill, with the proposal of
numerous budgets that cut this type of funding, as well as the
investments.
Looking at the 2017 tax law's cap on state and local tax
deduction, it does create challenges for state revenue agencies
facing pressure to provide relief for taxpayers. And the
President's budget would have devastated state investments.
Now, I am proud that the House at least addressed and
passed legislation to repeal the SALT cap, and I am also very
proud that we continue to pass appropriations that do reflect
our priorities, all of our priorities, Democrats and
Republicans. But I do believe that there is more that we can
do.
We should provide, as you have heard over and over, we
should provide more certainty to our state governments by
passing our appropriations bills on time. And we in this
Committee should be passing our own fiscally responsible budget
resolutions, instead of simply reacting to this
Administration's proposals for austerity. In this way I do
believe that we can ensure both our federal and state tax
dollars are being spent efficiently and responsibly.
Now, as a member of the Ways and Means Committee, as well
as the Budget Committee, we examined the impacts of the 2017
tax law, and we specifically examined that--what I mentioned,
that cap on the state and local tax deduction. We heard from a
number of witnesses from municipalities and emergency service
providers about the harm that that tax does, concern that it
could harm investment at the local level.
Now, Dr. Gordon--and I apologize if you have answered this
before, I was out at another hearing--but why would this be the
case, in regards to the potential damages that it could
provide?
Dr. Gordon. So the state and local tax deduction, like any
deduction that is tied to marginal tax rates, was one of those
deductions that was upside down, that benefited people more at
the high end of the income distribution who faced higher tax
rates. The cap addressed that inequity, however at a cost,
which is basically providing less of a subsidy to states to
provide services to low-income people who live in the same
state as those high-income people. So I think we have to
remember that state and local governments spend about two-
thirds of their budgets on health care and education, goods
that the federal government and federal taxpayers feel are
important.
There is also a concern that limiting the SALT deduction
basically makes it even harder for people who live in high-cost
areas like the Silicon Valley or like New York City, that are
very productive and have higher salaries and higher wages, that
are nominally higher but don't buy as much, in terms of actual
rent and things that you need to survive. The federal tax code
doesn't really take that into account, as you know.
So the SALT deduction was one way of equalizing those
differences.
Mr. Panetta. Got it, thank you. And now, moving on to
another issue that is important to me: biennial budgeting. And
I know there was a question asked from my colleagues on the
other side of the aisle.
But just again, Dr. Murnieks, what benefits have you
experienced from biennial budgeting in Ohio, and what
challenges, as well, have you experienced?
Ms. Murnieks. Congressman, biennial budgeting in Ohio is a
long-standing tradition, and it is required in our state. We
find that that enables us to plan ahead. We forecast our
revenues well in advance, we plan our programs well in advance.
It provides opportunity and certainty around when we are having
the discussions about the budget, so that it is all on a
schedule, and we can--you know, we can keep to that.
It is, I think, most important for our local partners that
they know when programs are put in place, that they will be
there for the duration of that biennial budget time.
Mr. Panetta. Great. I am out of time. Thank you, I yield
back, Mr. Chairman.
Chairman Yarmuth. The gentleman's time has expired. I now
recognize the gentleman from Oklahoma, Mr. Hern, for five
minutes.
Mr. Hern. Thank you, Mr. Chairman. I always love it when we
talk about the Tax Cut and Jobs Act, because it is a bit of
schizophrenia we have, because we talk about how it benefits
the rich and poor, and--or the rich over the poor. And then,
when we talk about SALT, we talk about it only helps the higher
wage earners, which, by classification, would be the richer.
And so it is always amazing when I hear this, and I always
hear the complaints from, really, two states, New York and
California, that have taxed their local citizens into oblivion
through state taxes, and then are critical of the federal
government wanting to not have the rest of the country pay for
those differences.
But all that aside, we will also have this year the highest
income revenue to the federal government in the history of the
country, even by putting back $1.9 trillion of taxpayer dollars
back into each individual's hands across America over the next
decade. And it is always amazing to me, when we hear about
putting money back in the pockets of people, the individuals in
each of your states and all the other states not represented
here today, that that is a bad thing.
It has always been a bad thing. I just got into Congress
about 14 months ago. It has always been a bad thing when
somehow we have reduced revenue flows to the federal
government. It has always been amazing to me, it is amazing to
people who are not in Washington, DC. The only people who are
really critical of that are the people in Washington, DC.
But here we are today and, you know, thanks to the
President and his getting after the regulations and cutting,
you know, somewhere around 10 to 15 regulations for every one
that is introduced, the growth is going on.
I always hear my colleagues talk and, you know, they are
great friends, but they always talk about ``it could,'' ``it
may,'' ``it possibly could.'' All these things that were talked
about by really smart economists never came to fruition.
And it is really this ideology that we are going to take
all this money back to the states. And each of you are
accountable to revenues, either in a county or a city or a
state. I assure you your people that get these moneys back
don't go bury them in the backyard, which is the only way they
would take them out of the revenue streams in your communities.
Because they do buy things in your communities, they do support
your schools, they do support your roads. And they support it
directly without coming to Washington, DC. and cutting off a
layer of administrative fees, which is what happens to much up
here.
The--we have seen the growth in jobs, the greatest growth
rate, lowest unemployment, the best employment of every group
of citizens of the United states that--like we have never seen
in none of our lifetimes. And I spent 30 years of my life in
Arkansas, grew up there in Russellville. You know, I am really
appreciative of what is going on over there. Obviously, I live
in Oklahoma. And, you know, now we are envying a lot of the
things you all are doing, which--I think that is awesome.
You know, the President has talked about transportation and
infrastructure. He has met with the leaders. You know, still,
we are trying to figure out how to fund this. I believe it is a
constitutional duty that we have to fund our infrastructure.
Most great civilizations have collapsed because they couldn't
maintain their infrastructure. And we have got a lot of work to
do there.
But, like I said to some really smart economists that had
really fancy degrees behind their names not too long ago, and
also to Fed Chairman Powell, we have got to get a lot more
Americans to work, producing a lot more revenue to the states,
and that is what this President pleaded (sic) to do, and his
campaign has done that. Promises made, promises kept. The facts
show it out. Regardless of how much you dislike him or hate
him, that is not an impeachable offense. But yet we are trying
to run him away because we don't like all this growth. So--for
some reason.
But I do have a question. And you know, as we look at this,
we continue to do this--inequities to the American people of
continuing resolution, omnibuses--something that most people
never understand in their life. As a business guy for 35 years
prior to getting up here, I thought this couldn't possibly be
this hard. You heard every person here today, I am sure, talk
about how budgets were easy to pass, but the leadership would
never get those into law since 1996, even though it is required
by law. We just changed the rules.
So can you just tell me--and I will start with my friend
from Arkansas--can you tell me what continuing resolutions do
for you, as a state director of finance?
Mr. Walther. Well, like Ohio, we budget on a two-year
basis, two-year cycle. And so there is uncertainty that is
added into each year, especially that second year, whenever you
are doing the budget. So that is the main thing, the
uncertainty. And, you know, it is helpful to know what--how
much money you are going to get on the next year.
Mr. Hern. So, to be completely bipartisan or nonpartisan,
my colleague from--or my friend from New York there, if you
could, talk about what CRs do to you.
Mr. Poloncarz. Well, they are no fun to deal with, because
we then put in contingency plans with regards to programs that
we know are federally funded that----
Mr. Hern. So can I just halt you there? I only got 20
seconds left, and I just want to--for the record, I have got a
person from New York and a person from Arkansas agreeing.
And we talked about how bad it is, and it should really be
frustrating to you all sitting at that table, and everybody
that is going to watch this video across C-SPAN and elsewhere,
that everybody in America--most people in America that are
decisionmakers hate CRs. Members of Congress hate CRs. Yet we
do them every single year, because that is the only way the
leadership can get together to make things work. We have to
stop this ridiculousness. We got to do it in regular order, get
a budget passed, be responsible legislators for the American
people.
I yield back.
Chairman Yarmuth. The gentleman's time has expired. I now
recognize the--now the gentleman from Massachusetts, the Vice
Chair of the Committee, Mr. Moulton.
Mr. Moulton. Mr. Hern, I think we all want growth, we just
don't want Russia running the country.
Mr. Chairman----
Mr. Hern. Was that a statement? They are not running the
country.
Mr. Moulton. Fiscal year 2020, Democrats fought to protect
Medicaid appropriations after President Trump suggested
reducing Medicaid funding by $1.5 trillion over 10 years. At
the same time, the 2017 Republican tax law, which benefits
wealthier Americans and corporations, added $1.9 trillion over
10 years to the debt. The effect might be even greater after
accounting for federal tax revenue being lost over CBO's
projections, as we experienced in 2019.
Now, every member here on both sides of the aisle
represents communities that count on federal dollars. There is
bipartisan dependence on federal funds. In fact, my colleague,
Mr. Roy, recently commented that states and communities should
solve their own problems, and not count on the federal
government, which is ironic, because he took home more federal
funds in Fiscal Year 2019 for his district than every other
Republican on this Committee by a factor of two.
But let's be clear: We all benefit from federal dollars.
But one party is responsible for sinking us into a fiscal black
hole by passing a tax cut for the wealthy and corporations that
is completely unpaid for. The result? We experienced the
largest deficit in American history last year.
In fact, Republicans controlled the House, the Senate, and
White House during appropriations for fiscal years 2018 and
2019. And the deficit rose each year. According to the U.S.
Treasury, the deficit increased in Fiscal Year 2019 to $984
billion, which is a 26 percent increase from the previous year,
and a 48 percent increase since Fiscal Year 2017, which is the
last year of appropriations under the Obama Administration.
Now, the debt that comes from these repeated deficits is a
massive bill that our kids and our grandkids will have to pay.
It is like passing your family house down to your kids when the
home is on fire, and taking out multiple mortgages so there is
no value left in it, and with no insurance policy to pay for
the loss. It is inter-generational theft.
And here is the problem for today's hearing: Nobody on this
Committee, including my Republican friends, and even the fiscal
hawks like Mr. Roy among us, has volunteered to give up federal
funds for his or her district. But we are running out of money.
The math doesn't add up.
Dr. Gordon, what fiscal challenges might state and local
governments face if we cut federal government investments in
states and local communities because of this massive Republican
deficit?
Dr. Gordon. It is interesting that you started with the
federal budget's own challenges, because I would say, in the
long term, those are the same challenges facing states and
localities: aging of the population; uncertain and, most
likely, rising health care costs.
The GAO recently calculated that states will face a gap
between revenues and expenditures on the order of 6 percent in
2068, so that is quite a ways out, but I think illustrates the
fact that all of these governments are in the same boat
together. And so I think the important question is figuring out
which level of government is best situated to bear which kinds
of risk, which levels of government should provide which kinds
of services, and getting that sorted out before these sort of
external threats come to play.
Mr. Moulton. Mr. Poloncarz, the low-income heat--low-income
energy assistance program became law under President Reagan,
who was no friend of taxes, to protect millions of low-income
households each year from extreme heat and cold when high
energy bills exceed their ability to pay for them. In President
Trump's last budget proposal he eliminated this program.
Now, I understand that, much like my district, your
country--your county gets rather cold in the winter. And
residents rely on this program to keep their homes warm. What
measures would you need to take if federal investment for this
program disappeared?
Mr. Poloncarz. Well, we would immediately have to find a
way to invest a few million dollars that we did not originally
budget for. Remember, my budget is on a calendar year, January
to December. So if it actually changed in the middle of the
year, and I am looking at the fall and the winter coming up, I
would have to find millions of dollars that I would be able to
put into it.
Because, as you note, even with climate change, where it
has been a little warmer in our community on and off this
winter, it is supposed to get really cold again, down to 10
degrees. And if you don't have heat, your pipes burst, you die.
It is a lifeline for tens of thousands, including working
individuals who rely on HEAP to help pay for their energy
costs. And without it, it would be devastating.
Mr. Moulton. And is it going to be easy to find those
millions of dollars?
Mr. Poloncarz. No. We would either have to go into our
reserves, or piggy-bank, which we have slowly developed over
time, or we would have to raise taxes, which would probably not
be acceptable in most situations, even if you are talking about
ensuring that someone has heat. A lot of my legislators that I
deal with are so averse to the idea of raising taxes that they
would rather let some people go cold than raise their taxes on
others.
Mr. Moulton. Thank you.
Thank you, Mr. Chairman.
Chairman Yarmuth. The gentleman's time has expired. I now
recognize the gentlelady from Texas, Ms. Jackson Lee, for five
minutes.
Ms. Jackson Lee. Mr. Chairman, Ranking Member, let me thank
you for this very important hearing. I started my service,
civic and governmental service, as a municipal court judge, and
as a member of the Houston City Council. And I always say that
is where the rubber hits the road. I have great respect for
state government, federal government, but it is where these
dollars really have a strong impact.
So I want to take note of the fact that we had a declining
debt in 2016, the end of the Obama Administration, at $14.2
trillion. And we now have, at the end of 2019 and growing, a
debt of $16.7 trillion. In those numbers, unfortunately, we
have an administration who seeks to find ways to impact or to
cover up that debt by cutting, I think, vital services.
So let me try to be as succinct--and if your answers can be
succinct, I would appreciate it.
Dr. Gordon, what is the economic rationale for federal
grants to states?
Dr. Gordon. The rationale is to address spillovers, things
that are benefits or costs that a state might not take into
account when it is making a determination. And some of those
spillovers include concerns of equity or fairness, or providing
the things that we think are important for people for a healthy
and productive life.
Ms. Jackson Lee. Do you--I come from the region of
Hurricane Harvey. I remember having to introduce a bill for
$174 billion. We are still trying to recover.
And I also call the federal government the umbrella in a
rainy day. That may be the fire hose in the fire, it may be the
relief engine in a tornado. How does that impact what the
federal government needs--has to do for states and local
governments?
Dr. Gordon. Thank you for pointing that out. You know, it
is often said that all states except one are bound by balanced
budget requirements. Actually, the truth is a little bit
murkier than that. And it turns out that even states that don't
have balanced budget requirements do balance their books each
year.
So the fact that the federal government can borrow in
extreme circumstances--or maybe not so extreme circumstances--
is important, because it is better situated to absorb risks,
whether from a natural disaster or an economic shock.
Ms. Jackson Lee. And we have experience with natural
disasters. As I have said, we are still suffering.
Commissioner Lambrew, I certainly work with my county
government. And one of the opportunities or responsibilities of
county government is, of course, the health construct, the
health system. This Administration, unfortunately, has been
using various efforts at undermining Medicare and Social
Security, but particularly Medicaid, with this whole concept of
block granting. Tell us what would happen if Medicaid is
sizeably diminished for the vulnerable people in your county.
Dr. Lambrew. I mean in the state of Maine we certainly
would experience problems not just--and I think it is important
to recognize the proposal in the budget is not just to cap
Medicaid as a block grant, it is to cut it. And I think that
those cuts represent significant proportions of people. It
could be that we couldn't provide the services to older members
or children, the way we do now. It would mean benefits that
would have to be scaled back.
We have been trying to, again, tackle the opioid epidemic
and provide treatment for mothers with children, to make sure
that the family stays together while that parent gets substance
use in order--we have been trying to get at social factors or
determinants of health. How do we make sure we are providing
the nutritional support for food security?
Ms. Jackson Lee. So----
Dr. Lambrew. Housing support, all of that----
Ms. Jackson Lee. So block granting and/or cuts in Medicaid
would be just devastating to local government, and your local
government, in particular.
Dr. Lambrew. Yes.
Ms. Jackson Lee. Let me, County Executive Poloncarz--do I
have it almost correct, sir?
Mr. Poloncarz. That is good.
Ms. Jackson Lee. We will--you can correct it in any way you
desire.
But let me indicate that one of the blows of this economy
now is the major tax cut, which the Administration insisted on
giving a corporate tax cut that even corporations did not ask
for. Almost five points down, as I understand it, which has
been ludicrous, in terms of dollars for the treasury.
Can you let me know--one of the other aspects that we work
a lot with county government or state government is
transportation infrastructure, which--water falls into that.
The whole issue of climate change and environmental quality,
even though--and EPA. What do you believe is the importance of
the federal government collaboration with some of these
quality-of-life issues? Certainly transportation.
And when those dollars are cut, how does it impact you?
Mr. Poloncarz. Well, it has an incredible impact. As I
noted earlier, Erie County has a road infrastructure that is
actually greater in length than three states. And as such, if
we did not receive federal assistance from the federal
government to actually provide additional money to do these
road projects, we would just continue to have problems.
And when you live in an area like Buffalo in upstate New
York, when you put roads down they don't last 50 years. You
have got freeze-thaws, freeze-thaws, sometimes multiples in a
year. And so, if you can get 15 years out of a road, that is a
good thing.
And if we were to go out there to try to replace our 2,400
lane miles of county roads every 10, 15 years, it would be very
difficult on our own. We would not be able to do it without
coming up with some other revenue source to pay for it, or
cutting the other services that exist.
Ms. Jackson Lee. As I yield back, Mr. Chairman, I just want
to say these are Americans who are speaking. They are speaking
for Americans, though they are located across the nation. This
$16.7 trillion debt that is growing is hurting Americans. This
tax cut is hurting Americans. And this potential war with Iran
will hurt Americans. I yield back.
Chairman Yarmuth. The gentlelady's time has expired. I now
yield 10 minutes to the Ranking Member, Mr. Womack from
Arkansas.
Mr. Womack. I will try not to take all that time, because I
know we have votes that are scheduled and will be coming up
here, perhaps even as I speak.
I want to thank the panel for being here.
I never miss an opportunity to brag on my home state, and I
am going to do that today with Secretary Walther. Not lost on
me is the fact that his chief of staff is in the audience
today, my friend, Alan McVey.
Alan, always good to see you. I appreciate the work that
you do and have done.
He has been a member of the economic development forces of
Arkansas for a long, long time, and doing great work up at
DF&A.
The current--we have had this discussion that has come up
in this--in the last couple of hours about the broken budget
process. I never miss an opportunity to talk about this
process, because, as the chairman noted a minute ago, we spent
all of 2018 investing our time in trying to fix this broken
budget and appropriations process cycle without ultimate
success.
But we did create a lot of ideas that are even today being
explored by the Congress. And I hope they come to fruition at
some point in time.
So let's talk about what we do in Arkansas: a two-year
budget. Larry, it is a balanced budget by constitutional
provision, and gives you the opportunity to provide certainty,
while at the same time protect yourself against some unforeseen
circumstance that might happen in the biennium. Is that
correct?
Mr. Walther. Yes, sir, it is. As I mentioned in my
testimony, we also build in safeguards, where we prioritize the
spending. And if revenues don't come in as expected, then the
lowest priority gets taken off the table, and then the next,
and then the next. And that has happened in the Depression--
excuse me, in the recession of 2008 and 2009. There was
significant cuts. So that is the way we do it.
Now, another aspect of our biennial approach is we still
have a session every year. This year we are going to have a
session in--it starts in April and it is called the fiscal
session. The only thing we talk about are the budget and the
fiscal requirements of the state. And if there is some need to
make adjustments in our budget at that time, or in increases
for services that weren't expected, we can make changes at that
point in time.
Mr. Womack. If you didn't have a responsibility to balance
your budget, it would make the need for a biennial session less
important to you, would it not?
Mr. Walther. That is correct. As I have heard the testimony
today, the need or the requirement of having a balanced budget
and no deficit and no debt leaves me with no choice but to make
adjustments if something happens.
If a major change happened in federal money that would
require the state to supplement more, or to provide more to
education or Medicaid, most of those are set. About 90 percent
of my budget is fixed. In other words, I don't have any choice.
I have got to spend the money.
And so, we would have to make a really difficult decision
on those other services that are out there that--you have
education, you have Medicaid, you have corrections. We all--
sometimes we don't talk about that, but we have got to deal
with the, you know, that aspect of our budget. And it is not--
it is predictable, but it is not going down, either, as I think
most states know.
Mr. Womack. Necessitated by your process, our process, you
have--it is incumbent on the general assembly, the elected
leaders that come from all of our cities and our counties, to
make some tough decisions from time to time. Is that correct?
Mr. Walther. That is correct. And we have a wide diversity
in our legislature, both in the House and Senate. So they bring
urban issues there, they bring rural issues. And so that is
where they come together in committees to hash out these
issues.
I will appear before them, my staff appears before them to
give them certain information having to do with the cost of the
decisions they are--they have before them, and that is a major
portion, or input into the decisionmaking process, is what does
it cost, and what do you have to do in order to spend that
money.
Mr. Womack. Director Murnieks, it works for the state of
Arkansas, it works for the state of Ohio. Why wouldn't or
shouldn't it work for the U.S. federal government?
Ms. Murnieks. Ranking Member Womack, I would say that it
works, and you should try it.
[Laughter.]
Mr. Womack. We will have that conversation among us, I am
sure, some time in the not-too-distant future.
I am going to give everybody on the panel an opportunity to
give us words of wisdom from out in the lands of where the
rubber meets the road, because that is where you guys come
from.
If you had a recommendation, one recommendation that you
could make to your federal government that would better
accomplish the objectives that were set out in this hearing
today to kind of expose that federal-state relationship, bind
it a little better without just throwing a lot more money at
it, given the fiscal condition--this is the caveat, OK? We are
a trillion-dollar deficit this year, $23 trillion in debt.
Given the fiscal condition of our country, what recommendation
would you make to this body or to the Congress of the United
States that would, shall we say, make things better for all
Americans?
We will start with you, Dr. Gordon.
Dr. Gordon. To the extent that there have been
jurisdictions that are in trouble, I think the federal
government has looked at expediting the flow of funds that are
already appropriated or obligated.
In the cases that I am familiar with, it has been difficult
to figure out where the bottlenecks are, in terms of local
jurisdictions actually spending federal funds. That seems
tremendously important to me as a management tool. If you had
some kind of indicators of where there were basically uncashed
checks, as happened in Detroit, for example, then the federal
government could perhaps be more responsive and provide
technical assistance or other kinds of help before it becomes a
bankruptcy, as in the case of Detroit.
So my very nerdy, wonky prescription is a better fiscal
data architecture for the federal government. It strikes me as
crazy that any company--to use that analogy--can tell you what
its offices in various parts of the country are spending at any
given point in time. I am not sure the federal government can
do that on a dime. It can do it, but it requires a lot of
digging.
So better data in real time on expenditures from federal
funds.
Mr. Womack. Better data architecture. I would agree with
you there, and there are many examples in the federal
government where we don't have a really good data architecture.
At least that data is not being shared and utilized for great
purposes.
All right, Dr. Lambrew, yours?
Dr. Lambrew. Maintaining the partnerships that we have at
the federal and state level, which is when we think through
Medicaid and these programs where you have to plan
significantly far out.
Not knowing if that relationship is going to be the same is
probably more of a problem for us than a CR, because at least
the CR is the same. But worrying about will the rules change,
will we be able to do supplemental payments to our hospitals,
will we be able to raise taxes the way we have done that, that
is in play right now with executive branch rulemaking.
I think that Congress being more engaged with our executive
branch to make sure that they are being good partners with
states would be a valuable thing.
Mr. Womack. OK. Mr. Poloncarz?
Mr. Poloncarz. It is almost the old do no harm. I am not
always necessarily coming here with hat in hand saying, ``Give
me more, we could do more,'' but if some of the recent budgets
that have been proposed by the Administration have been passed
as is, it would be--have a tremendous impact.
And there is no part in some ways of our county government
that doesn't get touched by the federal government, from
Medicaid, TANF, to even the Army Corps of Engineers helping us
design a fish ladder for a dam so that we don't have invasive
species going up a creek.
So I would just say do no harm, and understand that we are
here to help and work with you as much as possible.
Mr. Womack. Secretary Walther?
Mr. Walther. I have a--I am going to come at it from a
little different approach. It would seem to--well, and I have
had two--well, my last two assignments in Washington, DC.
were--I was the director of U.S. Trade and Development Agency,
and I was also on the board of EXIM Bank. And both of those
agencies are designed to promote exports from the United States
to foreign countries.
And at the EXIM Bank it is a bipartisan board, and I was a
minority board member. But we worked outstandingly together,
because we were going in the same direction. Our objective was
to make the companies in the United States better prepared for
exporting, and to finance those exports. It is bipartisan.
What would help, from Arkansas, what people sometimes call
flyover country, would be if our legislature, the Congress and
the Administration, were on the same page as it relates to
these sorts of issues. And set the policy, and then move
forward. But you have to do it together, and that is a tough
hill to climb.
Mr. Womack. Director Murnieks?
Ms. Murnieks. Yes, I would concur with the comments about a
better data infrastructure. And actually, in Ohio we are
implementing a new project called Innovate Ohio that is focused
on just that.
I would say, looking at the long term, instead of focusing
on short-term accomplishments, look at the long-term vision,
and focus on long-term results. Governor DeWine likes to say,
``The seeds we plant today we may not see the trees that they
produce during our lifetime,'' but we know that those
investments matter. And so we are focused on children and we
are focused on how we can improve their lives.
In--I would say more flexibility in how we go about
achieving those results; reducing regulations, following some
of the examples like what we have implemented in Ohio with
reducing the number of regulations each time we adopt new; and
also looking at the business and economic impacts on all of our
new regulations.
Mr. Womack. My compliments to the panel. Thank you very
much for joining us today, and we could utilize a lot of this
wisdom and put it to work for the betterment of the American
people. I thank you.
Chairman Yarmuth. I thank the Ranking Member. I now yield
myself 10 minutes for questioning.
And I think it is really astounding that there was no one
anywhere in this room today that denied that federal funds at
the state and local level are really critical. And that is a
starting point, I think. What we do have some question about is
the issues of flexibility and strings.
And I was a young staffer up here--very, very young--many
years ago, during the Nixon Administration. And the first job I
had, the first assignment I had, I was working for a Republican
Senator from Kentucky. And my first real assignment was to
write a speech supporting a program called revenue sharing,
which the Nixon Administration was putting forth.
And under revenue sharing, they took a huge chunk of money
and just gave it to states and cities and towns. And no strings
attached. The only string, as I recall--and my history may be a
little shaky--was that the public had to be engaged in the
decision as to how to spend the money. But there really wasn't
any accountability after that.
The program went on until 1986. It was canceled under the
Reagan Administration, largely because the deficits were
getting higher and higher, and there wasn't enough money to
continue doing that. They needed the money for--Reagan was
trying to buildup the military at that point, and a variety of
other things. The population was getting older.
But that is kind of the extreme we are looking at. Just
give the money back, use it for whatever you want. I haven't
heard that kind of a proposal recently.
Dr. Gordon, you have addressed this in various ways during
the course of the hearing. But in a general sense, to the
extent that we want some degree of flexibility--I will
stipulate that, although that is dangerous, but I will
stipulate we want some degree of flexibility and we want some
degree of accountability--what should be the goals of the
flexibility and the accountability?
Dr. Gordon. I think that is the question. And actually, my
reading of the history on general revenue sharing is, yes,
there was that great quote from, I think, James Baker that
there was no more revenue left to share. But also, if you look
at the funding formula, there were internal contradictions,
where they included a term that was supposed to represent a
community's need or--you know, need for federal revenue, and
also its own revenue-raising effort.
So basically, you had, you know, many different
expectations, all wrapped up into this one program, as well as
the state-versus-local component. And it was just sort of
unrealistic to expect it to bear all of those expectations.
So yes, I have tried to say a couple of times that I do
think there needs to be a balance, in terms of flexibility and
accountability. You know, states actually experiment with this
on their own, vis a vis grants to local governments. So there
might be something to look at there, in terms of specific
program design.
Chairman Yarmuth. Thank you. And I want to talk about
flexibility with regard to Medicaid, specifically, because--
Director Murnieks, you talked about this and all the waivers
that are out there--and we have had that experience in
Kentucky, as well, in our last administration. The Governor
asked for a lot of waivers, wanted to impose work requirements,
and those types of things.
And it occurs to me that, while a certain level of
flexibility may or may not be useful with Medicaid, but you run
the risk, with a waiver system, of creating--maybe without
intention, maybe with intention--a reduction in care. You are
going to be--you know, work requirements, for instance, will
reduce--and by the Governor's own admission, when he submitted
the waiver in Kentucky, it was 95,000 people under his own
estimate that were going to lose care.
Is that not a risk when you are asking for--at least if you
are talking about, from our perspective, wanting to provide
health care for people who need it most, is that not a risk
that, with waivers, you could end up with, again, either
malevolently or not, a reduction in care?
Ms. Murnieks. Mr. Chairman, I believe that if--when we are
talking about flexibility, we are talking about more than
waivers. We are talking about actual flexibility to implement
programs on the ground in the best ways that they work for our
constituents. We think that our states and our local
jurisdictions are those that are closest to the problems that
Ohioans in our local communities are facing, and they are at
the best place to make decisions about the way to assist them
to achieve their American Dream.
And I would say that, in Ohio, an example of how we have
been able to bring different resources together, different
states and federal funds, can provide an example of that, but
we have had to do that through achieving a lot of waivers and a
lot of paperwork, and that if that--if flexibility were the
rule, instead of the exception, that would make it much easier
for us to help the citizens of Ohio.
Chairman Yarmuth. So can you give me an example of
something you were trying to do that became problematic because
of the lack of flexibility within Medicaid, for instance?
Ms. Murnieks. I would say that when we are looking at the
different--as we are re-defining the Medicaid program in Ohio,
we are looking at the managed care system and what the--when we
are re-procuring that, what it can look like.
And how can we encourage those dollars to provide better
health outcomes? How can we structure the system so that it is
focused on the health of Ohioans and wellness?
And, as we are examining that, it is extremely complicated.
The regulations are quite onerous, and it is--it takes a great
amount of time. And I would say that there aren't that many
people throughout the system that understand, when you push one
lever, the impact that it has on the rest.
So again, just being able to help states with fewer
regulations, so that we can structure our programs in a way
that, in the case of Medicaid, it is focused on wellness
instead of just the regulations of the system.
Chairman Yarmuth. I appreciate that.
Dr. Lambrew, would you address that?
Dr. Lambrew. Sure.
Chairman Yarmuth. You, obviously, are very familiar with
Medicaid, and----
Dr. Lambrew. I am.
Chairman Yarmuth [continuing]. in Maine.
Dr. Lambrew. I am. And we have been actively exploring all
the options that we have within our MaineCare Medicaid program
to do better by the people of Maine.
We haven't hit that many barriers with, like, one good
exception. We talked earlier about housing and the
affordability of housing being a problem. If a person is
homeless, they can't necessarily take their medications, see
their doctor. They have transportation problems. There are
things outside the boundaries of the health care system that
affect health. I think Medicaid rules have limited the ability
for Medicaid funding to go outside those bounds. That is about
accountability, and I appreciate that.
But going to your earlier example, I think we sometimes
confuse flexibility with program integrity. The state
innovation waivers that are in effect for different parts of
the law with the Affordable Care Act put guardrails on what
could be approved for a waiver, and I think they are
interesting, right?
Four conditions, not complicated: to do a waiver you have
to cover as many people with as affordable coverage as
comprehensive coverage, with no increase to the federal budget,
right? That is four simple guardrails that, if a state can do
it better, they can. So that is the sort of guardrails I think
we all should think about when we talk about flexibility.
Can states do it better? In many cases, yes. But so long as
they maintain that program integrity, what is the program meant
to do, I think that is a way for federal government to guide
states.
Chairman Yarmuth. Well, I think that--you know, I think it
was Mr. Norman was talking about you don't want to waste money,
you don't want to--and you don't want to impose requirements
that are not going to serve any purpose. And I think one of the
problems we have up here is we rarely do oversight to see what
regulations, after they have been in place for a while, make
sense, and which don't make sense any more, which are providing
a public benefit, and which aren't. But that is another thing
we need to talk about. The Ranking Member and I will figure
that out next week.
But I am going to surrender the rest of my time, and thank
the witnesses very much for your time and wisdom, and your
appearance. And if there is no other business before the
Committee, the hearing is adjourned.
[Whereupon, at 12:52 p.m., the Committee was adjourned.]
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