(Host) Governor Jim Douglas stepped down this month as head of the National Governors Association. And he says one of the biggest challenges facing him and other governors is the mounting federal deficit.
VPR’s John Dillon has more:
(Dillon) The National Governors Association is a bipartisan organization that tries to speak with one voice for the states. Douglas’ term as chairman ended this month at a meeting in Boston.
During his tenure, federal money targeted for health care, education and economic stimulus helped states avoid more red ink.
But Douglas said the states’ chief executives heard a sobering message last week about the federal deficit.
(Douglas) "We had former Senator Al Simpson from Wyoming and President Clinton’s chief of staff, Erskine Bowles, who have been appointed to co-chair the president’s debt and deficit commission. And the message was quite clear from them that the well has run dry. Our $13 trillion national debt is simply unsustainable."
(Dillon) Douglas said Washington no longer has the money to help bail out states.
(Douglas) "The United States of America spends every single dime that comes into the Treasury on only three things: Social Security, Medicaid and Medicare. Everything else is borrowed money."
(Dillon) Douglas said the NGA will submit ideas to the deficit commission for balancing the budget. And for a governor who has rarely supported new taxes, Douglas backs an idea that would raise additional federal revenue. He wants to tax income earned by U.S. citizens overseas at the same rate as they would pay in this country.
(Douglas) "After a certain dollar amount, income that’s earned by American citizens abroad is exempt from federal income taxes. I think it’s fair to ask, ‘Why?’ If the money is earned and it’s on your tax return whether you earned it consulting somewhere else in the United States or consulting outside the United States, I think it’s reasonable to tax it all."
(Dillon) Vermont is in better shape than many other states. The unemployment rate is relatively low, and some tax revenues appear strong. But Douglas says Vermont still faces a potential $120 million budget shortfall next year.
The state is also counting on additional federal Medicaid dollars to meet the "Challenges for Change" budget goals that were set by the Legislature.
But Administration Secretary Neale Lunderville said that federal money – about $5 million – has been delayed.
(Lunderville) "And at this point we don’t know when to expect it and how much we’ll get it. So we’re not sure that that will be there. But we’re looking at that as part of the broader context of finding $38 million in Challenges related savings. So we’re still early in that process."
(Dillon) The Douglas administration and the Legislature will get an update on the state’s revenue projections later this week.
For VPR News, I’m John Dillon in Montpelier.