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NLC asks Congress to sign onto NLC agenda.

NLC Past President Cathy Reynolds urged Congress to join NLC in setting a new agenda last week as Congress began work on writing a major tax bill and prepared to take up a key resolution setting budget priorities for the federal government.

Testifying before the House Budget Committee, which is scheduled to act on setting budget priorities next week, Reynolds said:

"The highest single priority of the nation's cities and towns is to change the 1990 federal budget agreement to reinvest in America's future economic security. It is to cut national defense spending and use the savings to reduce the national debt and invest in the nation's human and public infrastructure.

"This year, in city after city, in town after town, leaders are cutting services and increasing taxes and fees. The use of drugs is up. Violent crime is up. But the combination of disinvestment and mandates from above and eroded tax bases from below are forcing local budget changes critical to tomorrow: we are cutting back on maintaining our infrastructure and adding to it; we are closing libraries and youth recreation programs; and we are closing schools for days at a time."

House Budget Committee Chairman Leon Panetta (D-Calif.) had asked a panel of state and local representatives to testify on the impact of the administration's budget, on the current fiscal condition of cities, and on state and local priorities. According to Panetta, federal aid to states and local governments was cut by 64 percent over the last decade. Yet, today, he said "the biggest threat to our security comes from within, not from outside our country."

The hearing is the only one scheduled in either the House or Senate to obtain input from community leaders. It was attended by Reps. John Spratt (D-S.C.), Martin Sabo (D-Minn.), Barney Frank (D-Mass.), Charles Stenholm (D-Tex.), Dale Kildee (D-Mi), Don Pease (D-Ohio), Louise Slaughter (D-N.Y.), Robert Wise (D-W.Va.), and Jim Cooper (D-Tenn.). Rep. Helen Bentley (R-Md.) came in after the testimony was over.

Reynolds was joined by Maryland State Sen. Larry Levitan; Boston Mayor Raymond Flynn, testifying on behalf of the Conference of Mayors; and Commissioner John Stroger of Cook County, Ill., testifying for the National Association of Counties.

Reynolds warned that the budget submitted by the administration would only make community problems worse: for it would erode both state and local revenue bases--in many cases in the middle of current budget years; it would undercut ability to finance public infrastructure; it would borrow even more from the future to pay for the past; it would continue a path of disinvestment in the nation's communities; and it would set the federal government on the path of even more expensive, but unfunded federal mandates to meet national goals.

She told the committee NLC strongly supports the following principles:

[subsection] recognition that long term investment in human and physical infrastructure is more important to national security - because it is economic security;

[subsection] 60 percent of all defense cuts should be dedicated to deficit and debt reduction; 40 percent should be dedicated to reinvestment in domestic discretionary investment; and not a dollar should be permitted for middle income tax cuts; [subsection] the bipartisan goals of Panetta and Rep. Gradison (R-Oh) to confront and control the costs to the nation of non-means-tested entitlement or mandatory programs;

[subsection] immediate removal of the firewall between defense, foreign aid, and domestic discretionary programs;

[subsection] clarification of the budget agreement to prohibit the types of mechanisms which made a mockery of Gramm-Rudman-Hollings, such as the use of accounting changes, provisions such as those labeled "gimmicks" by Secretary Kemp, and "backloading" proposals which accelerate revenues forward, but costs to the taxpayers far into future and deliberately outside the 5-year time-frame set up by the budget summit agreement;

[subsection] any tax cut or expenditure increase should be required to meet two tests: (1) it must not increase the long term federal deficit and national debt, and (2) it must demonstrate clear, long term benefits to or investment in either the nation's human or physical infrastructure;

[subsection] any tax bill should take into account the impact of any and all provisions on states and local governments--the second largest employers, after manufacturing, in the nation and the levels of government must severely impacted by the recession;

[subsection] any budget priorities should take into account the enormous and accelerating disparities within the nation in acting on any tax or economic legislation; and

[subsection] any federal action should evaluate the impact of unfunded federal mandates on state and local taxpayers.

Redefinition of National Security

First, and most important, Reynolds testified:

"Our membership devoted more than two years shaping a national municipal position on federal budget priorities. That position was adopted not just by our Board of Directors at our Congress of Cities in December, but by our full membership--Republicans, Democrats, and Independents--on a unanimous floor vote.

"That resolution calls on the President and Congress to redefine national security to economic security in the post Cold War era. It calls for cutting defense spending to no more than $200 billion annually by 1996 and directs that 60 percent of all savings must be dedicated to reducing the federal deficit and national debt; 40 percent must be dedicated to an economic conversion and long term investment in the human and physical infrastructure of our nation's communities.

"For more than half a century we have invested in excellence in defense. We have created unparalleled weapons systems and trained the finest fighting force of men and women the world has ever known. But today the threat in my community or any community is a factory closing and relocating to the Far East--with all its attendant costs of unemployment, loss of access to health care, and loss of pensions. We need only look to Japan to understand how much and how quickly the world has changed."

Impact on State and Local Government

Reynolds also asked Congress to think carefully about the impact of any federal tax cuts on local communities:

"In the last year, municipalities and states have raised taxes, fees, and other revenues, and cut payrolls, programs, facilities and halted enough capital investment and maintenance to eliminate a combined deficit of $50 billion. These are all funds drained out of the economy.

"The President's budget proposes to increase foreign aid, but to cut aid to the nation's cities and towns; it proposes to impose a major, new, unfunded mandate - mandatory Medicare on states and local governments and their employees in the middle of our current fiscal year - and to undercut our revenue bases."

She warned that because most state income taxes are tied to the federal income tax, lowering any taxes or increasing withholding, as the administration has already done, or increasing the personal exemption would lower state income tax revenues next year by about $1 billion - at a time when the economy is already wreaking havoc with both state and local tax revenues:

"Such erosions of state tax bases would then initiate a new vicious cycle of spending cuts, more mandates, and tax increases at both the state and local level - with adverse consequences both for the national economy, and our mutual constituents.

"One does not have to look far to see that more and more schools are closing for days at a time, more and more maintenance and capital accounts are being cut back, more and more libraries are closed. Thus, federal tax cuts have the chance of becoming self-defeating in the short term, but damaging to children and productivity in the long term."


Reynolds also urged the committee to address the issue of unfunded federal mandates on local governments and their taxpayers:

"President Bush properly recognized that federal mandates affect federal taxpayers through increased state and local taxes and the diversion of scarce state and local efforts away from education, health, and other critical investments.

"While this recognition is important and appreciated, I want to note the seeming contradiction in the President's budget with regard to lead-based paint testing and abatement - an issue currently pending before the full House Energy and Commerce Committee with significant cost implications for local budgets.

"The President's budget acknowledges that |lead poisoning is the most common environmental disease of young children' in America and that HUD public housing subsidies will be the |main source of funding' for lead-based paint testing and abatement. But he proposes to eliminate such funding next year.

"This is passing the buck--in an expensive and disingenuous way--and it is part and parcel of our very profound concern about the priorities you set for your colleagues. Someone will have to pay: those American children or local governments as required by Congress if the federal government simply turns it back.

"I believe we all ought to be in this together."
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Title Annotation:National League of Cities
Author:Shafroth, Frank
Publication:Nation's Cities Weekly
Date:Feb 17, 1992
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