Governors Appeal for Emergency Assistance; State Revenues Sank After Terror Attacks

The nation's governors, alarmed by a steep decline in revenueslast month, appealed yesterday to Congress and the Bushadministration for emergency assistance. Unless help comes soon, theywarned, states will have to slash their spending, thereby increasingthe risk of a serious recession.

Michigan Gov. John Engler (R), the chairman of the NationalGovernors Association, told reporters in a conference call fromLansing that since the Sept. 11 terrorist attacks, many states haveseen a double-digit drop in tax receipts compared with a year ago.

"Our economies were weak beforehand and now they are quite shaky,"Engler said.

The governors suggested steps they would like to see included inthe stimulus package being drafted on Capitol Hill, with the blessingof the Bush administration.

In addition to expanded unemployment, health and other benefitsfor families of laid-off workers, they asked for relief from somefederal regulations and the suspension of state matching requirementson major federal highway, airport and other construction programs.

Engler and Kentucky Gov. Paul E. Patton (D), who is vice chairmanof the governors association and presented the program to members ofCongress yesterday, emphasized that unless help comes soon, balanced-budget requirements in most state constitutions will force programcuts and layoffs, deepening the economic slump.

Their plea came as more states revised their budget plans to copewith severe downturns in revenues. In recent days, shortfalls rangingfrom $10 million in Maine to as much as $1 billion in Washington havebeen reported.

Florida, where the president's brother, Jeb Bush, is governor, isone of the worst-hit states. The Legislature's budget office hasestimated that the shortfall in 2001-02 may reach $3 billion,according to newspaper reports. The governor has endorsed postponinga scheduled Jan. 1 tax cut of $120 million that would benefit stockand bond investors by raising the exemption on income from"intangibles."

Even states that enjoyed healthy summer economies, such asColorado and Idaho, have ordered cutbacks in construction programs,school funding or social services.

The association's proposal to suspend matching requirements forstates for such programs as highway, airport and prison construction,brownfields cleanup and community development projects is designed toaccelerate spending on public works and provide additional jobs.

The governors also proposed measures to aid laid-off workers. Theyinclude easing the eligibility rules for disaster-relatedunemployment insurance, rescinding scheduled cuts in reemployment aidto displaced workers and creating sliding-scale subsidies for healthinsurance premiums for people who lose coverage when laid off.

The association's agenda also includes provision of supplementalbenefits for people forced back onto welfare rolls and for familiesof National Guard and Reserve personnel called to active duty.

The governors cautioned against changing the tax base through suchmeasures as capital gains exclusions or accelerated depreciation inways that would have the unintended consequence of reducing staterevenues.

And they renewed their plea for Congress to authorize asimplified, standard program for collecting taxes from Internet salesas a condition of renewing the moratorium on Internet access charges.

The loss of sales tax revenue is a "deadly threat" to long-termstate solvency, Patton said.