[Congressional Record Volume 150, Number 98 (Thursday, July 15, 2004)]
[Senate]
[Pages S8233-S8234]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. ROCKEFELLER (for himself and Mr. Smith):
  S. 2671. A bill to extend temporary State fiscal relief, and for 
other purposes; to the Committee on Finance.
  Mr. ROCKEFELLER. Mr. President, I rise today with my friend and 
colleague from Oregon, Mr. Smith, to introduce the State Fiscal Relief 
Act of 2004. This legislation will extend the Federal fiscal relief 
enacted last year in order to give states a much needed boost as they 
continue to struggle to recover from the persisting economic downturn.
  Over the last three years, states have experienced the worst fiscal 
crisis since World War II. The loss of state tax revenue has caused 
substantial state budget deficits, which totaled over $250 billion in 
fiscal years 2002, 2003 and 2004. These shortfalls forced states to 
consider raising taxes or making substantial cuts to critical programs 
such as public education, health care, and public safety. As my 
colleagues know, Federal efforts to stimulate economic growth can be 
futile if states are forced to cut spending and increase taxes. We 
recognized this last year, and we did something about it. We enacted 
legislation that provided $20 billion in federal assistance to the 
states--$10 billion for Medicaid and $10 billion for general revenue 
grants.
  Some of my colleagues have since questioned the benefit of this type 
of federal assistance to the States. They have charged that the relief 
was not stimulative and that states did not use the additional 
resources appropriately. Well, I encourage my colleagues to take a very 
careful look at the facts. When you analyze all the available data on 
the $20 billion fiscal relief package enacted last year, only one 
logical conclusion can be reached--during the worst stages of the 
economic downturn, when many Americans lost their jobs, states were 
able to step up and fill major gaps in programs and services because 
they had the benefit of federal fiscal relief. My home state of West 
Virginia used the $125 million it received in federal assistance to 
resolve budget shortfalls and prevent cuts in Medicaid. That was the 
goal of our efforts all along--to reduce state budget deficits and 
prevent cuts to critical programs and services--and states used this 
temporary assistance as it was intended.
  In West Virginia and States across the country, fiscal relief 
strengthened state economies and protected our most vulnerable citizens 
by helping to reduce the massive spending cuts and tax increases states 
would otherwise have had to make. The Medicaid portion of fiscal relief 
was particularly important in helping to stabilize State budgets. As 
many of my colleagues are aware, Medicaid spending provides a critical 
form of economic stimulus in addition to delivering essential health 
services to our most vulnerable citizens. The Medicaid program supports 
jobs in every state. It helps keep hospitals and nursing homes 
operating in our communities. Every dollar invested in Medicaid results 
in an almost three-fold return in state economic benefit.
  In January, the Kaiser Commission on Medicaid and the Uninsured 
released a study which confirms that, because of the timeliness of the 
Medicaid assistance, all fifty states were able to maintain their 
Medicaid eligibility levels. This means that access to critical health 
services and programs for pregnant women, children, the elderly, and 
workers who lost their jobs and employer-sponsored health coverage was 
preserved. Without these increased Medicaid payments to States, the 
number of uninsured Americans would have been far greater over the past 
several years.
  Unfortunately, when we passed fiscal relief last year, we did not 
include appropriate safeguards to make sure this

[[Page S8234]]

Federal assistance would remain available to States if the economic 
downturn lasted longer than anticipated. Many who supported the $20 
billion fiscal relief package hoped the economy would rebound quickly 
and that federal assistance to the States would not be necessary beyond 
fiscal year 2004. Well, the fact of the matter is that the economy 
remains weak, and fiscal relief is still necessary.
  While states are beginning to report stronger revenue growth, it is 
clear they are not out of the woods yet. State revenues are still far 
below pre-recession levels and are growing at a sluggish pace. In 
April, the National Conference of State Legislatures reported that 
states are struggling with an aggregate budget deficit of $36 billion 
going into fiscal year 2005. Eliminating fiscal relief now will deal a 
serious blow to the states as they struggle to climb out of the 
economic downturn.
  To remedy this problem, the bill we are introducing today provides 
$4.8 billion over 15 months to help states maintain the coverage they 
are currently providing through Medicaid. This additional funding, 
which is still temporary, will finish the job we started last year. It 
will help states weather the entirety of the economic downturn without 
having to cut vital programs and services for low-income women, 
children, and seniors. While I would have liked to have incorporated 
even more money for enhanced Medicaid payments to states, I recognize 
the federal budget realities currently before us. The $4.8 billion 
included in our bill represents a workable phase-down transition from 
the $10 billion states received last year, and I know it will go a long 
way to preserve health care coverage for Medicaid beneficiaries during 
this ongoing recession.
  In addition to providing $4.8 billion for Medicaid, our bill also 
reimburses states for the $1.2 billion in net costs they will incur in 
fiscal years 2004, 2005, and 2006 as a result of the Medicare 
Prescription Drug, Improvement, and Modernization Act. As I stated when 
I voted against this bill, the Medicare Modernization Act has several 
major flaws that must be addressed. One such flaw is the fact that the 
new law undermines state revenues in the midst of their efforts to 
rebuild their economies. The State Fiscal Relief Act will correct that 
mistake.
  I urge my colleagues to support this important legislation and to 
stand up for the millions of Americans who are working at low-wage 
jobs, who benefit from the numerous public programs and services that 
fiscal relief has helped to maintain, and who are in the process of 
reinvigorating our economy.
  Mr. SMITH. Mr. President, I am pleased to join my colleague from West 
Virginia, Senator Rockefeller, in offering such an essential piece of 
legislative. This bill will extend a portion of the short-term 
assistance package that Congress provided to States and territories 
last May, because as most of our constituents realize, our economy may 
have rebounded, but prosperity has not reached all Americans. This 
proposal will continue to help States fund Medicaid, one of their most 
critical and also most expensive programs. The bill also provides 
funding necessary to ensure that Congress meets its commitment to help 
states transition seniors into the new Medicare prescription drug 
benefit program.
  I am quite certain this proposal will be controversial. On the one 
hand, many people who represent seniors and other vulnerable 
populations that receive their health care through the Medicaid and 
Medicare programs will argue that this bill does not provide enough 
help to states to prevent programs and benefit cuts. On the other hand, 
many of my colleagues will complain that the federal government already 
provided $20 billion in fiscal assistance last year through the 
economic stimulus package. In developing this bill, I tried to take an 
approach that balanced the concerns expressed by both sides.
  I agree that state economies are recovering and that they do not need 
an additional $20 billion in federal assistance. In my home State of 
Oregon, unemployment is dropping and State income tax receipts are 
higher than projected a few short months ago. However, that doesn't 
mean Oregon's economy is out of the woods yet. Oregon's 6.8 percent 
unemployment rate continues to be significantly higher than that of the 
national average of 5.6 percent. And that gets to the heart of why I 
have introduced this bill providing a second, though significantly 
reduced, round of State fiscal relief.
  It is clear to me that States still need help. They need help meeting 
the increased obligations that come during economic downturns and 
recoveries. And while our nation's economy is improving, which is due 
in large part to the President's leadership last year when he 
challenged Congress to pass an economic stimulus package, it has not 
yet fully recovered. So more must be done to protect the programs that 
people turn to when they are in need, programs like Medicaid.
  Now I know some will argue that last year's money was wasted, that it 
didn't do anything to boost the nation's economy. They might even cite 
a recent report released by the General Accounting Office that said as 
much. Well, I have to question how $10 billion in funding that went to 
the nation's largest health care program didn't result in a positive 
outcome. Health care is approximately a $1.6 trillion industry in the 
United States and in 2003 it was the second largest employment sector 
in the country--the fourth largest in Oregon. When you consider the 
significance of this industry on our nation's economy it seems unlikely 
that the government's effort to forestall program cuts in Medicaid, the 
largest health care program, would not have a positive effect on our 
economy.
  Certainly, if you think about large corporations that have millions, 
even billions, of dollars in revenue each year this money may not mean 
much. But I can tell you, to the beneficiaries and small providers in 
Oregon, like the Community Health Centers, this infusion of federal 
funding prevented significant cuts to their Medicaid benefits and 
reimbursement rates.
  Now States, just as they are starting to see their economies recover 
and are realizing increased income tax revenue, are faced with the 
prospect of losing all of this Federal assistance. That is why I have 
introduced this bill, because I understand the benefit to state 
economies that results from an extension of this temporary financial 
assistance. We are almost there, but I believe more assistance is 
needed and I look forward to working with my colleagues to pass this 
bill and help our states weather this economic storm.
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