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Fiscal cliff just some of the challenges states are grappling with right now -- joining us for a look at the fiscal health of the states is -- acting CEO of the council of state governments David thanks for joining us.
Op my question to you is do you get the census and complacency out there about those fiscal cliff that how they'll get it done in the end -- that -- not really.
Taking the necessary have preparations.
That's right it leave you certainly from the State's perspective we get the feeling that the federal government is involved in one of those nightmares that many of -- -- in college where.
You wake up on the day of but Jessica and realize that you've been -- and of course and never even attended it.
There's this sense of foreboding and yet great sense of complacency at the federal government about -- how -- we create even a process to begin to deal with this perfect storm.
Of so many issues -- remain unresolved and that have an automatic.
A time bomb ticking that goes off on January 2.
-- but the biggest issue really are at the pensions right we have underfunded pensions across this country at the federal level at the state level.
I frankly private and public.
How could possibly fix that and saving the states at the same time.
Well it's it's a big issue in many states are grappling with it.
It's estimated that anywhere from one trillion to three trillion dollars of unfunded liability exists in the state pension programs for public employees across this nation.
An additional one trillion dollars of unfunded liability exists in those additional benefits like health care programs.
That states provides -- to retirees so it is a huge issue.
Many states have used to consensus based process in which they've reached across the aisle Republicans Democrats coming together legislators and and executive branch officials working together.
To come up with a program that will place that state pension plan on -- road to viability but the sustainability.
Of the current structure of state pension plans.
It ranks right up there with health care costs -- number two fiscal concerns for the states David what.
-- what's the biggest.
Chunky hike of federal money that goes to the states what's the biggest piece of the pie.
Far and away our health care.
Medicaid that expenditures have been going up -- on average over 7% over the last decade.
Medicaid expenditures for the states have increased 100%.
So it -- a cancer growing on the budgets of the states.
In fact it is now eclipsed a public education as the number one source of expenditures for state budgets.
It's incredible how it continues to grow and over the next five years based on how much state revenues are predicted to grow.
And how much health care expenditures are predicted to grow.
We anticipate that within five years there will be a 22 billion dollar gap.
Between revenue growth and health care expenditure growth.
But annually -- But it if we go over this fiscal -- the states are gonna get hammered even more we have defense spending will be cut states like Virginia get hammered right but yet still some people are saying.
Let us go over the cliff let the federal government learned their lesson how come.
-- -- there's a great sense among some state leaders that because many of the funding programs that.
Are are the primary source of revenue from the federal government -- of the states are exempted from the sequester requirements.
However sequester alone those automatic cuts that -- into place on January 2.
Aren't the only elements of this fiscal cliff the fact that congress hasn't re authorized temporary aid to needy families the welfare program it expires on September 30.
A lame duck congress we'll have to make some kind of decision when the new fiscal year for the federal government begins on October 1 regarding on that funding stream.
The Alternative Minimum Tax.
-- out expired.
Last year you have the bush tax cuts -- would expire on January 2 do we increase withholding or not how how do we administratively.
Pursue policies that make sense and what states want in regards to their relationship of the federal government it's exactly what business wants in relationship to the state they want predictability.
I want sustainability.
And they want stability and we have none of that in this climate of of chaotic policy making -- which congress has been comfortable to kick the can down the road itself Portland or the problem altogether yep.
While but thank you so much David actives and -- council of state governments like you for joining us.
Actually Tracy thank you thank you mind --