WASHINGTON, Feb. 24 (UPI) -- President George W. Bush on Monday met with the nation's governors, promising that his fiscal 2004 budget proposal would help boost states' economies as they face widening deficits amid falling revenues.
"What's on my mind is to make sure this country is strong and safe," Bush said. "One way to make it strong is to do everything we can to encourage job growth."
Bush made his comments during a meeting with National Governors Association Chairman Paul Patton, governor of Kentucky, and Idaho Gov. Dirk Kempthorne, vice-chairman of the group.
The NGA was in Washington for its four-day winter meeting. Bush and members of his cabinet met with the leaders of the group, whose local economies are in the worst shape since World War II.
The budget crisis has led some states to cut services and entitlement program benefits such as Medicaid.
The governors were hoping for federal help with Medicaid, which provides health insurance for low-income families. States say that Medicaid costs, which are the second-largest expenditure in state budgets, are the reason for many economic problems.
Bush told the group that his fiscal year 2004 budget request seeks $400 billion in grants for the states, a 9 percent increase over last year.
An NGA survey found that states expect budget gaps of more than $80 billion in fiscal year 2004. The states still have about $30 billion in deficits for fiscal year 2003 -- a gap NGA officials say must be closed before the year ends on July 31.
On Sunday, Bush attended a dinner for the NGA, at which he told them that they had a shared responsibility for protecting the homeland, encouraging economic growth and jobs, making certain every child learns and expanding access to health care.
"We'll meet these responsibilities together," Bush said.
Patton has said the governors were entering the third year of inadequate state revenues. States have spent down their reserves so more spending cuts are inevitable, Patton said.
Indiana Gov. Frank O'Bannon and North Dakota Gov. John Hoeven renewed their call on Monday for Congress to quickly approve a bipartisan compromise to protect funding for the State Children's Health Insurance Program. SCHIP served some 5.3 million children in fiscal year 2002.
Without an agreement, states could lose up to $2.7 billion in unspent SCHIP money. In October 2002, $1.2 billion reverted to the federal treasury and $1.5 billion is scheduled to revert on Oct. 1. The loss of funding would cause states, already strained by billions of dollars in budget shortfalls, to make significant cuts in enrollment and prevent states from providing health care to uninsured children, the NGA said.
SCHIP was created under the Balanced Budget Act of 1997 to provide states with the ability to design comprehensive and meaningful health insurance coverage for uninsured children. It began distributing $40 billion to states over 10 years in 1997.
Bush pointed to his tax cut proposal as a remedy for states' economic woes. In that proposal, he would abolish the marriage penalty, increase the child credit to $1,000 and cut individual tax rates.
"My attitude is, since the economy is not as good as we like it to be, we ought to accelerate the tax relief which they've already planned. That will put about $70 billion immediately into our economy, since I intend to ask for this plan to be made retroactive to January 1st of this year," he said.
The White House Budget Office has estimated federal budget gaps of $200 billion to $300 billion. Bush also proposed a $675 billion economic stimulus package to help reduce unemployment.
Bush said he was asking Congress to support small businesses with a tax deduction of up to $75,000 in capital expenditures. And he is seeking an end to taxes on dividends paid to shareholders, calling it "unfair tax policy."
Bush said he looked forward to working with the governors on Medicare reform, saying the decades-old entitlement program has not changed even though medicine has.
He said he was hoping that the welfare reauthorization bill would gain approval in the Senate. The House of Representatives has already approved it. Bush proposed changes to the 1996 Personal Responsibility, Work and Family Protection Act, the landmark 1996 welfare reform law that moved millions of people off public assistance and into jobs or work-related activities such as community service.
Bush wants to increase the 30-hour a week work requirement for recipients by 5 percent a year through 2007. Work -- as defined in the new bill -- would include at least 24 hours in a paid job or supervised community service, or 16 hours in a work activity such as caring for a disabled child.
The bill also mandates improved childcare and provides up to $300 million a year for programs that promote marriage and households with two married parents. And it authorizes a $20 million grant to support and promote responsible fatherhood.
The administration has received criticism from states on its education reform plan. State officials have complained bitterly that the "No Child Left Behind" legislation has been underfunded, forcing legislatures to make tough decisions about cutting school programs, increasing class size and reducing the number of teachers.
The governors say they want more federal support for education initiatives.
Bush's education reform package, dubbed "No Child Left Behind," became law last year. It mandated that states integrate accountability and performance measures into their schools.
The new law, the cornerstone of the Bush education agenda, requires annual testing for children in grades three through eight in reading and math. The law also provides about $1 billion aimed at ensuring all children read by the third grade, while requiring states to have "highly qualified" -- not necessarily certified -- teachers in every classroom within five years.
The White House has proposed in its $2.2 trillion budget request moving Head Start, an early childhood education program, out of the U.S. Department of Health and Human Services and into the U.S Department of Education. It called the program "a piece of an uncoordinated and overlapping puzzle of federal, state and local programs that are failing to meet the social and academic needs of pre-school age children."
That view drew the ire of Head Start advocates and educators, particularly Marian Wright Edelman, president of the Children's Defense Fund.
"You have really got a successful program that is really serving children, has been well-evaluated and over 90 percent of parents say work, and we know is getting children ready for school at grade level. Why tear that down and start all over?" Edelman said, referring to the Head Start program.
On homeland security, Bush said he was disappointed that Congress did not respond to the $3.5 billion the administration sought, but pledged he would do everything he could to get money to the states to help respond to the threats the country faces.
With the United States on the brink of war, Bush could face a parallel with the administration of President Lyndon Johnson, who in the 1960s fought both a war in Vietnam and a war on poverty at home. Analysts say Johnson likely overstressed the federal budget by doing so.
While the Congressional Budget Office estimates the cost of deploying troops to the Gulf would be between $9 billion and $13 billion, and that prosecuting a war would cost between $6 billion and $9 billion a month, the federal budget reflected a clear decline in spending for discretionary programs and domestic initiatives.