NACo is "concerned" that federal discretionary spending does not become an easy target as the National Commission on Fiscal Responsibility and Reform makes recommendations to balance the federal budget by 2015, Executive Director Larry E. Naake wrote in a letter to the commission.
The panel, established by President Obama in February, is to make its recommendations by Dec. 1.
Naake noted that local governments are facing "a perfect storm" of decreased tax revenues, declining state and federal aid, and increased demand for social services — all of which have strained county budgets to the point of requiring layoffs, service cuts and fee increases.
"Counties are concerned that too much focus will be placed on reductions to domestic discretionary spending programs, within which many programs critical to counties’ ability to fulfill their numerous responsibilities are funded," Naake stated. This would be detrimental to the wide range of services and programs counties provide their residents — such as ensuring public safety, operating hospitals and building infrastructure — at a time when counties are coping with diminished revenues.
In the letter, NACo called on the commission to evaluate the consequences its recommendations will have on local governments, and to make sure they neither result in cost-shifting to state and local governments, exacerbating fiscal strain, nor impose underfunded or unfunded mandates on state and local governments.
Naake also urged that Congress, the federal government and agencies should "meaningfully engage" local governments on deficit-reduction solutions by inviting state and local officials to participate in current and future deliberations.
"Counties stand ready to work in partnership with the federal government to help achieve the goal of deficit reduction and continue our role as a provider of services to the citizens of this country," he wrote.
NACo also asked that the federal government not abandon the payment in lieu of taxes program, which reimburses public lands counties for services they provide. The association also urged the commission to see infrastructure spending as an economic driver that creates economic expansion and deficit reduction over the long term. This includes targeted federal investments in transportation, broadband, businesses incubators, water and wastewater infrastructure, community facilities, community and economic development through the community development block grant program.
Further, NACo asked that the commission, when considering entitlement reforms, remember that Medicaid provides essential core funding for the local health care safety net for vulnerable populations.
"With that in mind, we would urge the Commission to include an analysis of the costs to state and local governments of proposed reforms to Medicaid, alongside projections for the federal treasury," Naake wrote.
In that regard, NACo encouraged the commission to make increases to Medicaid’s federal medical assistance percentage (FMAP) automatic and triggered by specific indicators of economic distress. The letter noted that the increased FMAP provided by the Recovery Act — and recently extended by Congress — has been a lifesaver for states and counties.
The "pass-through" requirement for states that require their counties to contribute to the non-federal share of Medicaid has also been extremely important, Naake wrote. "When the economy is down, more individuals will be eligible for Medicaid at precisely the same time that states and counties experience revenue shortfalls … Congress should change the law permanently so that Medicaid can fulfill its role in the safety net as well as counter-cyclical spending," he wrote.
The letter also addressed tax reform, urging the commission to preserve local governments’ ability to finance their legitimate functions.
"Tax-exempt financing is a component of that ability and should be preserved as an affordable option for local governments to use for budgeting and financing of long-range investments in the infrastructure and facilities necessary to meet the demand for government services," Naake wrote.
Expressing appreciation of the magnitude of the task ahead, he added: "There are many tough decisions yet to be made at all levels of government…. While none of the decisions will be easy, [counties] are ready to continue our intergovernmental partnership and welcome consultation or any questions you may have."
The complete text of the letter is available on NACo’s website at www.naco.org.