States Assail Economic Stimulus Plan

The economic stimulus legislation President Bush signed into law will cost states billions of dollars over the next few years and force deep cuts in education, healthcare and transportation, the National Governors Association says.

The provision most troubling to the governors: A bonus depreciation allowance for businesses that will drain roughly $14.7 billion over the next three years from the 46 states that calculate corporate income taxes under federal rules.

This loss will compound state deficits, which already total $40 billion and could reach upwards of $50 billion by the end of the year.

“The action Congress took on the economic stimulus package today continues the assault on the states’ revenue base with the bonus depreciation provisions,” said Ray Scheppach, executive director of the National Governors Association, in a release denouncing the bonus depreciation.

Bush favored the expansion of depreciation write-offs as a way to stimulate business investment.

The governors had been lobbying for an increase in federal Medicaid funding to offset the corporate tax cut. Earlier stimulus bills included such an increase.

The National Conference of State Legislatures and the American Federation of State, County and Municipal Employees also had been lobbying for direct aid to states.

Despite their disappointment with the legislation’s effects on state coffers, all three organizations applauded the stimulus package’s 13-week extension of unemployment benefits.