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Markell and Fallin: Nation’s Fiscal Health Depends on Flexible Federalism

The uncertainty surrounding budget cuts hamstrings states’ economic growth

States and the federal government are inseparable partners in creating a strong economic future for our country. What affects one partner affects the other. Just as governing a state is vital to the nation’s fiscal health, federal decisions are vital to a state’s fiscal health.

In January, we delivered this message at the National Governors Association’s State of the States Address. While each governor faces his or her own specific circumstances, we all have to facilitate job growth, educate our kids and balance our budgets.

Our state economies are tightly linked to the national economy. We know that with federal spending cuts states will receive less, but it is the uncertainty of how much, from where and when that undercuts our budgets and slows economic growth.

One of the largest uncertainties concerns elements of the fiscal cliff that were postponed or left out of the American Taxpayer Relief Act of 2012. The relief act only postponed scheduled spending cuts that would have reduced federal grants to states. Fundamental entitlement and tax changes were not addressed, and no action was taken to increase the federal debt limit. If the debt limit is not increased soon, disruptions in federal funding or in capital markets could quash our nascent recovery.

State economies are recovering slowly and only now are returning to the revenues they collected in 2008. Governors believe in flexible federalism: a strong, cooperative relationship between states and the federal government that solves problems at both levels.

As we continue to work with Congress and the administration, governors are committed to a vibrant and strong collaboration to maintain and promote a balanced system. We have outlined what flexible federalism would look like when it comes to deficit reduction.

Certainly, spending cuts are necessary and inevitable. And, we are prepared to do more with less. However, we believe Congress and the administration must keep these four points in mind:

• Federal reforms should produce savings for both the federal government and states;

• Deficit reduction should not be accomplished by merely shifting costs to states or imposing unfunded mandates;

• States should be given increased flexibility to create efficiencies and achieve results; and

• Congress should not impose maintenance of effort provisions on states as a condition of funding.

Essentially, all of these points boil down to flexibility and partnership.

Governors need flexibility to take care of the unique needs of our citizens and the challenges facing our states. Secondly, we need an active and engaged federal partner to work with us when developing solutions.

For example, states need federal funding stability and certainty to pursue long-term planning and project delivery. That is why we support state flexibility to make investments in infrastructure projects through existing and new self-sustaining financing mechanisms.

States and schools also are working hard to implement the new standards and sweeping changes from the Race to the Top program. We need a long-term, permanent, fair and flexible federal K-12 education policy that works for every state, school and student.

States also need timely, long-term reauthorization of key federal-state programs. Short-term reauthorization of programs, such as Temporary Assistance for Needy Families and the highway program, stalls state innovation and prevents program improvements.

We all have important responsibilities and obligations to our citizens. While each state is different, our challenges are similar. When people on all sides look for the best solutions to our pressing challenges, we can enact powerful, positive changes.

Governors are optimistic about our states and the role they can play in making this country stronger. We look forward to working with our federal partners toward a more prosperous and brighter future for our states and our citizens.

Delaware Gov. Jack Markell, a Democrat, is chairman of the National Governors Association. Oklahoma Gov. Mary Fallin, a Republican, is the group’s vice chairwoman.

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