Bush Most 'State Friendly', NGA Official Says

Texas Gov. George W. Bush is the most "state friendly" candidate in this year's presidential race and Arizona Sen. John McCain is the least, the executive director of the National Governors' Association said Wednesday.

"I would rate Bush the highest and McCain the lowest. McCain has very little appreciation for state government," Ray Scheppach said when asked which of the Republican and Democratic presidential hopefuls were most sensitive to state concerns.

The NGA official offered his assessment at a conference on state issues sponsored by Governing magazine the day after McCain trounced putative Republican frontrunner Bush in New Hampshire's first-in-the-nation presidential primary.

McCain has been a vocal opponent of state taxation of Internet transactions, a stand directly at odds with the position of the major non-partisan organizations that represent the states such as NGA, the National Conference of State Legislatures (NCSL) and the Council of State Governments (CSG).

Scheppach and NCSL executive director William Pound, another featured speaker at the conference, said federal intervention in the Internet tax debate is a threat to the sovereignty of states and holds serious long term dangers as state revenue growth lags.

An 19-member Advisory Commission on Electronic Commerce made up of state and federal officials, leaders of the high-tech industry and representatives of advocacy groups is scheduled to give Congress a set of recommendations in April on future tax treatment of fast-growing e-commerce. But the congressionally created panel is badly split on the issue, and its findings are expected to be inconclusive. States and cities derive nearly half of their revenue from sales taxes, and many state and municipal officials fear staggering budget problems if Congress decrees that Internet sales are to remain tax-free.

"States derive their independence from the ability to tax," the NCSL's Pound said.

"It's what separates the states from the principalities in Italy, " Scheppach added.

The two agreed on the agendas facing state legislatures, most of which are now in session. While disagreeing on priorities, Scheppach and Pound listed education, taxes, school, violence and sprawl or "smart growth" as top issues this year.

Pound predicted that states -- flush with an estimated $33.4 billion surplus --will continue to cut taxes. He expects cuts at least as great as last year's, when state tax reductions totalled $5.5 billion.

This trend will continue despite signs that revenue growth at the state and local level will be about five percent in 2000, lagging the estimated 7 percent revenue growth at the federal level, he said.

Pound also predicted that the debate over how to spend money from the $206 billion tobacco settlement that is being divided among 46 states and the District of Columbia will occupy many state legislatures. He predicted that the bulk of the tobacco money will go to health-related and children's programs, and that eight to 12 percent will be devoted to tobacco prevention programs.

Both state leaders predicted intense political warfare for control of state legislatures as redistricting looms after the 2000 Census. There is a narrow political margin at present, with 50 state House or Senate chambers in Democratic hands, 47 in Republican hands and one tied. Nebraska has a nominally non-partisan unicameral legislature which has a majority of Republican members. There have been steady Republican gains, particularly in the South.

Pound predicted that this trend will continue, although more slowly than in the recent past. He said women, who now occupy 22 percent of the state legislative seats, will make further gains.

States are in the midst of a revolution driven by information technology, Scheppach said. He said the new economy will lead to real growth in wages as the Internet allows business to cut costs and increase productivity, but that states lag eight to 10 years behind private industry in becoming more market-oriented, flexible and customer friendly.

Scheppach added that governors understand that education, including post secondary community colleges, are an essential part of state responsibility to train workers for the high tech economy.