State Legislatures Seek to Override Governors’ Stimulus Money Rejections

Published July 1, 2009

To the delight of taxpayer activists, some governors have voiced concerns about the federal stimulus package’s “bailout” of the states, with Govs. Mark Sanford (R-SC) and Rick Perry (R-TX) rejecting a portion of their states’ funds.

President Barack Obama’s $787 billion stimulus package includes more than $541 billion to be handled by state governments for a variety of new expenditures and budget-balancing actions.

After the stimulus bill was signed in February, Sanford and Perry criticized bailout money allocated to expand state unemployment benefits as a counterproductive increase in the size of government. About $700 million was earmarked for that purpose in South Carolina, and $555 million was dedicated to Texas. The governors said state taxpayers would be on the hook for the increased cost of the unemployment programs after the one-time deluge of cash dried up.

Long-Term Burden

Taxpayer advocates echoed the governors’ concern.

“The issue is whether Texas employers should continue to pay these higher unemployment taxes long after our economy has recovered,” said Talmadge Heflin, director of the Texas Public Policy Foundation’s Center for Fiscal Policy. “We agree with Governor Perry that they should not.”

Sanford sought a waiver from the Obama administration to use the $700 million to pay down debt rather than grow state government.

“We believe it is fitting for us to be granted flexibility with these stimulus dollars to indeed begin the process of addressing those substantial debts so that future generations aren’t stuck with the double pain of paying back unsustainable federal and state spending,” Sanford said in a press statement.

People involved in the “Tax Day Tea Party” movement, which organized thousands of demonstrations across the country on April 15 to protest, among other things, the stimulus package’s rapid increase in the national debt, largely applauded Sanford and Perry for their stance.

Popular Principle

“While Governor Perry’s opposition is a principled position, it’s also proving to be the popular one,” said Michael Quinn Sullivan, president of Texans for Fiscal Responsibility and organizer of a recent Tea Party opposing high taxes and intrusive government.

State legislators hungry for federal handouts strongly opposed the rejection of stimulus funds. The Texas Senate passed a bill introduced by state Sen. Kevin Eltife (R-Tyler) in April that essentially ignores Perry’s request. Taking the stimulus money would “lessen the burden on businesses significantly,” Eltife said.

“The state Senate fancifully imagines Texas can take the money and only make these changes on a temporary basis,” Sullivan said. “That flies in the face of the letter of the law passed by Congress and the experience of other federal string-laden money.”

Failed Bypass Efforts

The South Carolina Legislature likewise sought to bypass Sanford and direct stimulus funds toward unemployment benefits, and a high school student petitioned the state supreme court to determine whether lawmakers could appropriate the money over Sanford’s objections. The court declined to hear the case.

“The supreme court’s dismissal validates our position that only the governor can ask for these funds,” said Joel Sawyer, Sanford’s communications director.

“We find this action is not ripe and appropriate for judicial determination unless or until the General Assembly has taken, as it is authorized to do, measures to appropriate the funds at issue,” the court wrote. Lawyers for the plaintiff interpreted the ruling as confirmation that lawmakers are indeed permitted to direct the funds as they see fit.

While other Republican governors, including Sarah Palin (AK), Haley Barbour (MS), and Bobby Jindal (LA), have voiced concerns over portions of the stimulus, Sanford and Perry have been the bailout’s most vocal detractors and have gone the farthest to reject part of the money.

Tired of Excessive Spending

“Thousands of taxpayers in our state stood up yesterday and said they’re tired of government spending beyond its means, that they’re tired of these so-called ‘stimulus’ efforts out of Washington DC,” Sanford said in a statement the day after the Tea Party protests.

“We’ve processed through our office petitions from 4,000 Texans who don’t want the state to be burdened by the heavy mandates and policy changes that will come with those federal dollars,” said Sullivan.

Josh Culling ([email protected]) is state government affairs manager for the National Taxpayers Union.