Senator Collins Introduces Tax Amendment

Ms. COLLINS. Madam President, I was beginning with my thank-yous to the distinguished chairman of the Finance Committee, who has worked so hard to produce not only the bill on the floor but also has worked very closely with the sponsors of this amendment to come up with a proposal for fiscal aid to the States that I believe is carefully drafted and is going to make a real difference to the 49 States that are struggling to close budget shortfalls.

I am pleased to have a number of cosponsors, including Senators ROCKEFELLER, BEN NELSON, SMITH, SCHUMER, COLEMAN, CLINTON, MURRAY, and WYDEN. But I particularly want to pay tribute to Senator Ben Nelson and Senator Rockefeller, who have worked night and day with not only Senator Grassley and myself but others interested in this issue to forge a compromise that I think will result, at the end of the day, in the conference report with $20 billion in much needed fiscal relief for our States.

Half of this funding would be through a temporary increase in the Federal Medicaid share, to ensure that States can continue to protect millions of vulnerable Americans who rely on the Medicaid program as part of the health care safety net.

The attacks of September 11, coupled with the subsequent recession and resulting unemployment, have placed tremendous and unanticipated strains on State budgets. The States are, after all, our partners in providing health care, education, and other essential services to the citizens of this Nation. They are, however, facing a dramatic and unexpected decline in government revenues at precisely the time when the demand for government services has never been higher because of a lagging economy.

States from Maine to Nebraska to West Virginia to Alaska are facing their most serious budget shortfalls in 50 years. States face deficits of between $70 and $85 billion for the next fiscal year, which begins in most States on July 1. They also face deficits of $26 billion trying to close the books on the current fiscal year.

Moreover, while the President's proposal for excluding dividends from taxation would spur needed investment in American businesses, it would cost the States nearly a billion dollars over the next 3 years. That strengthens, to me, the case for providing aid to the States.

Let me tell you what the State of Maine, my home State, is facing. The State of Maine faces a budget shortfall for this year and the next of approximately $1.2 billion. Let me put that in perspective.

The entire budget for the State of Maine is only $5.3 billion, which means it faces a shortfall of approximately 20 percent. Imagine if the Federal Government were struggling with a budget shortfall of 20 percent. It would have to close a $440 billion budget gap, and it would have to do so without borrowing a single dime. That summarizes the dilemma facing our State.

Forty-nine States have balanced budget requirements. They have to balance their budgets. They cannot print more money. They can't run temporary deficits. They can't borrow the money to close the deficit. As a consequence, States have been cutting spending, increasing taxes, using rainy day funds, and delaying capital projects. They are doing whatever they can because they must balance their budgets.

All of the States have cut programs—even programs that provide lifelines to our most vulnerable citizens. At a time when the number of people without health insurance is climbing, 49 States have either already cut their Medicaid Programs or are planning to do so.

Medicaid provides a critical health care safety net for 44 million of our most vulnerable low-income citizens, including 218,000 in my State of Maine. States, as a result of trying to balance their budgets, are slashing Medicaid Programs. As a consequence, approximately 1.7 million Americans are at risk of losing their health insurance. That means they are going to be added to the growing number of 41 million Americans lacking health insurance.

Moreover, not only is our proposal compassionate, not only will it help the most vulnerable Americans keep their health care services, but our proposal makes sound economic sense. Putting money into the hands of States is a great way to stimulate economic growth in conjunction with the tax provisions of this package. As States cut spending and raise taxes to balance their budgets, they weaken the overall economy.

A recent Goldman Sachs analysis underscores the stimulative effect of State fiscal relief. The report notes that "State governments could provide significant support to the economy without large long-term budget cuts, reducing the need for these jurisdictions to raise taxes, and cut spending."

After all, if we cut taxes here in Washington only to have taxes increase in State capitals across the country, we will wipe out some of the good we are trying to do by cutting Federal taxes.

I am not saying Congress should bail out the States. I am not saying States should not have to make hard choices. I am not saying States should not balance their budgets. The States are going to have to make hard, painful choices, even with the $20 billion we are proposing to assist them. The nature and the severity of the fiscal crisis facing our States has convinced me that we simply have to help them. The consequences are too dire otherwise, and too many vulnerable low-income American families will suffer if we do not step in and lend a helping hand.

I am encouraged that the economic stimulus package approved by the Senate Finance Committee authorizes temporary fiscal relief to the States. As the distinguished chairman has indicated, tonight we are deciding how to fill in the blanks and how that help should be allocated. We focus particularly on Medicaid because of our concern about the impact of State budget cuts on low-income families in America.

But there is another reason it makes sense to target one-half of the assistance to the Medicaid Program. That is that Medicaid is the fastest growing component of State budgets. While State revenues are stagnant, or declining in most States, Medicaid cuts are increasing at a rate of more than 13 percent a year. That is why States have no choice but to look to the Medicaid Program.

If you look at home State budgets, the vast majority of State spending is for education and Medicaid. If we want to help protect low-income Americans, the best thing we can do is to approve an increase in the Federal match for the Medicaid Program.

As to the State of Maine, our amendment would mean $116 million over the next 2 years for health care and other services that will help our most vulnerable Americans.

There is another advantage to using the current Medicaid structure—what is known as the Federal Medicaid matching rate, or FMAP. That is, the States don't have to take any new legislative action or establish any new administrative structures in order to use these additional Federal matching funds. They can go straight into the Medicaid Program.

The remaining $10 billion could be used by States and local governments to fund education or job training, health care or other social services, transportation or other infrastructure needs, and law enforcement or public safety. In other words, we provided a great deal of flexibility for that remaining $10 billion.

Our amendment would allocate $4 billion of those funds directly to counties and local governments.

Our amendment is strongly supported by a wide range of health care groups, which I will submit as part of my formal statement in the interest of time.

The support for our proposal—the Collins-Rockefeller-Nelson-Smith, et al, amendment—underscores the critical importance of providing assistance to States right now. Now is when they need it. Now is when we must act.

Congress is most effective when it stands arm in arm and not toe to toe with our partners, the States. Our States face a fiscal crisis of expanding dimension. We need to help, and this bipartisan, carefully crafted amendment is the critical step forward in doing just that.

I hope we will have a strong bipartisan vote for this important amendment. It is similar to proposals that my colleagues and I advanced last year and this year which garnered the overwhelming support of the Senate. Now we can make sure that it happens.

I would like to yield at this time to the Senator from West Virginia who has been stalwart in arguing for fiscal relief for the States. It has been a great pleasure to work with him. I yield to him as much time as he needs out of my time.