tv [untitled] CSPAN June 5, 2009 12:30am-1:00am EDT
>> okay. why don't we go to the phone operator. are there any questions on the phone? >> if you have a question pressed star and then one on your touch-tone phone. once again, if you have any questions press story and then one on your phone. we have frank wolf with education daily. go ahead. >> i wonder if you can talk about education funded by the states a little bit, what in fact we are seeing and what they can do to sort of protect the bennett programs -- [inaudible] >> well, they were beginning to do some cuts in education and then when the recovery package came i think they sort of backed off. governors generally like to protect that but i think unfortunately going forward when
to be hard to continue to protect it in spite of the funding because it is such a significant portion in other words if you look at health care and education you've got about 70% of your total budget and i think so far what they've done is cut the rest but now i think going forward unfortunately they are going higher and elementary and secondary. >> our next question is from kevin from associated press. please go ahead. >> given the economic environment should the federal government consider guaranteeing short-term loans and bond issues from the state's? [laughter] >> i will let you take that. >> well, we certainly don't have a position on that and that does seem to be an issue where the
state's very on their positions just depending on their current ability or at least they're perceived ability to go out on the markets. i do think though that while there was a lot of consternation at the beginning of the financial crisis last fall it's interesting to see again i think there's the realization that despite the turmoil and difficult fiscal situation from the debt financing side again states compared to other entities are very low risk and even in california is a very low risk both historically and otherwise, and i think that over time that will be realized. >> the only other thing i'd say is it's not easy. i remember the federal reserve can't really do that legally. i think you need congress to act to provide the right and i would say in the area in terms of broad covers are now pushing forward.
>> the next question is from tammie from cnn. please go ahead. >> thank you. [inaudible] >> the next question is from lisa from abc news. please go ahead. >> thanks. my question has to do with the recovery act and state fiscal spending with respect when you talk a little bit about how even with the recovery act the decline has gone on. if you can speak a little bit more about how the recovery act impacted in medicaid and education, where we are seeing specifically how that has helped. >> okay. as i mentioned, those two programs represent about 135 billion. it is the only flexible money that is there.
and what it's allowed states to do particularly under medicaid, because it is also the medicaid money was retroactive to november 2008 and it's over 27 month period but that has allowed the states to take back their money because the feds were picking up an extra 6% share and to spread it around you find places where that money plus used to protect education and from a macroeconomic standpoint it was very positive because we have shortfalls of 200 billion going in before the recovery package and that would have had a larger negative impact so that medicaid money and education money you could see as soon as it appeared that bill was going to go through. and number of states had already announced cuts were able to put them on hold.
the problem is that we always figured it would be nice to get 30-50% of the shortfall in that particular time that is what it panned out to be. but the economy deteriorated so much more after that that there is just not enough taxable money. so i -- i think it was a very, very good policy. it was a fair amount of flexible money and highly targeted. basically the two areas the governors wanted to protect so i'm very positive about the recovery package. but this downturn is much worse than anybody anticipated. >> and if i could follow up has the state said anything anecdotally about the multiplier effect and how they help that impacts the revenue in terms of some of even the targeted on flexible spending that is supposed to go on in their states'. >> welcome you know, there's a multiplier effect on all of the
stimulus and unfortunately in a lot of the others it is going to be leader. in other words the highway money and the others are going to pay out two to three years, the other money and so on, so it will create a multiplier. but unfortunately, it will be significantly later. the recovery package i think a good job because most of the tax cuts were very front end, the flexible money to states was front ended with a lot of the construction money was further down. but it is pretty positive from the standpoint it did help over the two to three year period. >> thank you. >> the next question is from steve buyer from steve mine.org. please go ahead. >> this is a question for both of you. usually the lag time for the states to catch up to the recovery is about two years. are using today from your
comments that you think it might be three, four, five years this time? >> scott, you want to take that? [laughter] >> i think it could come and i think what most states are telling us right now and certainly when we look at this report we see if you do have the recession and this year or by the end of this year we hope at least by fy e. levin you would start to see budgets come close to 2008 levels and then we would see growth budgets in 2012. but if the severity and length of the recession continues then it could go further. but as ray and others have said, too, the problem is we have difficult structural issues before word just in terms of all kinds of cost drivers, like corrections costs for prisons and so the question is as the recovery money ends how much is
made up by an increase in revenue from an improved economy lag in terms of growth rates for budgets not on till fy 12. >> the only other comment i would make is if the on employment begins to come down, then you consume state revenues will begin to come out, but the big problem here is the medicaid growth is going to be very, very late in the cycle. and if you don't get a very strong uptick, that growth is cooling to be a huge problem for several years to come. >> and i just want to add, too, another reminder because i think it is so important from the revenue side most states, particularly those with personal income taxes, are extremely dependent on the wealthiest individuals and for that capital gains and investment income and
so what happens with that source of revenue the next two to five years is going to have a huge impact on the fiscal situation in most states. >> any other questions, operator? >> we have a question with john coffee from the commercial. please go ahead. john, your line is open, please go ahead with the question. >> yeah, do you know how many state legislatures or governors are late or deadlocked on the budget for the next fiscal year with financial problems and disagreements? >> we don't have a number right now. alladi -- i think that question will be particularly apropos in
about three weeks because it will be interesting to see how many finish up. i think there are some states concerned but i think right now it would only be a handful anywhere from five to ten. >> you could imagine though three weeks is an eternity in terms of legislatures and governors trying to fix budgets. >> thank you. >> the next question is from tammie from cnn. please go ahead. >> do you think feet gough onerous -- [inaudible] better handle on the decline of the revenues so their estimates of 2010 and budgets for 2010 are going to be more i don't want is a realistic or accurate, or will we see, you know, continued grapple to close the gap? >> i personally don't -- i mean, until the rate of decline really
begins to bottom out in terms of the state revenue numbers it is going to be very, very difficult. one of the hardest problems and economic forecasting. once you begin to see that a bottoming, i think the accuracy will increase quite dramatically. but until that time i think there's going to be a lot of unknowns. scott? >> i have to say that this was a remarkable luck this period. the fiscal folks, i can't tell you how they can't wait for the day between the stability in the money coming in and their forecasts and they continue to believe they've wrapped the forecast as far down as possible and they are still missing it. so it is remarkable as to how difficult the recession has been from the standpoint of state revenues. >> that would be scott, royte? >> yes. >> villamil the thing i would mention is everybody was looking
for so-called green shoots and today they are questioning whether the green shoots are really there so we have got to have the chutes first before we talk at all about revenue. >> thank you. >> the next question is from chris buckley from enr. please go ahead. >> yeah, a quick question about the program cut. you talked about in a 09 we had the chart that showed that higher education and k-12 had the highest amount of cuts in terms of the most making cuts in those areas. do you have any numbers in terms of dollar figures tell what shall which areas by the dollar figures got the biggest cuts? >> we didn't specifically ask that in this report. we just asked if they did a particular cut to that syria, to that particular topic area.
>> but do you know generally how, say the education sectors would compare to other areas? >> in terms of dollars generally? >> am i guess, and we've heard you primarily will see that in the higher education area to the extent it was bennett in what has been made up by the recovery act fund and of course they are requirements not to allow for further declines based on previous levels. so, to the extent you would see that, it would be primarily in certain higher education levels. but there are a maintenance of effort requirements for higher education also. my guess is the percentages would be low although you did see cuts in those areas. >> thank you. >> we have a question from frank bolten from education date. please go ahead. >> yeah, i just want to make sure these are estimated fy
2009, the 2.2% decline in the state spending is projected i guess most states, was it may or june? >> is, 46 states fiscal report we will have act was. >> okay, thanks. >> at this time we have no further questions. >> okay. thank you very much. appreciate it. >> thank you. that concludes this conference call. you may all disconnect at this time.
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would transfer stock in the auto companies directly from the government to tax payers. this is 20 minutes. >> lamar alexander, this is senator bennett with me. senator kyl is coming in a few minutes from the finance committee. we are introducing today the although stock for every taxpayer act to require the treasury to distribute to individual taxpayers all the stock in the new gm and chrysler within one year following the emergence of the new gm from bankruptcy proceedings. this is the best way to get the auto companies out of the hands of washington bureaucrats and politicians and into the hands of the american people in the marketplace where it belongs. so instead of the treasury owning 60% of the shares in the new gm and 8% of the shares of chrysler, you would owned them.
if you're one of about 120 million americans who pay federal taxes on april 15. this is the fastest way to get the stock out of the hands of washington and back into the hands of the american people who paid for it. to keep it simple and help the little guy also get an ownership stake in america's future, treasury would give each taxpayer an equal number of the available shares. the treasury department said it wants to sell the shares as soon as it can, with the president of general motors said in a phone call with a number of us in congress a couple of days ago that this is a very large amount of stock. and that an orderly offering of the shares might take several years. these shares might not be worth very much at first, but put them away and one day they might contribute something to college education. for example general motors 610 million shares were worth
only about 75 cents just before bankruptcy but they were worth $40 a share four years before that and 75 of you before that. already we are beginning to see what government ownership of car companies looks like. yesterday the president of gm and chrysler spent four hours before congressional committees talking about dealerships. i assume they drove themselves here in congressional we approved methods of transportation probably their own hybrid car. that meant they didn't have any time yesterday to design cars, to build cars or sell cars unless we get the stock out of the hands of washington this is going to be repeated over and over and over and over again. nearly 60 committees and subcommittees in washington who can summon the heads of the auto companies here to give them advice about how to do the job. car companies executives who ought to be managing complex companies will be reduced to the status of an assistant secretary
living from subcommittee to subcommittee hauling briefing books. you can just imagine what the questions would be next week. whoops the next model going to be? with colorable the paint the? which plant should be closed? why don't you open one in my district? how many cars should have flex-fuel? what should the work rules be at the flint plant? what should the salaries be in the executive offices? where can conferences be held? someone will want to know why the gm volt is by a battery made in south korea instead of in the congressman's congressional district. there will be lengthy questions about the number of holidays. thousands of written questions demanding thousands of written answers, all of it under oath, so lots of lawyers will need to be involved. and it's not just the congress we have to worry about. the president has already called the mayor of detroit and assured
and it will create an investor fan base of 120 million or so americans who are now stockholders in those companies who may be a little more interested in what the next model of chevy might be. think the fan base of the green bay packers whose ownership is distributed among the people of green bay. this is the fastest way to get back to the wise principal. if you can find it in the yellow pages, the government ought not be doing it. more than the money it is the principal of the thing. the other day a visiting european automotive executives said to me with a laugh that he had come to the, quote, new american automotive center, washington, d.c.. to get our economy moving again, let's get out of the companies out of the hands of washington politicians and bureaucrats and back into the marketplace in the hands of american investors. the sooner the better.
>> wind la amar described this amendment that he just described to you i said i have an amendment that will fit perfectly. and so, i have joined my amendment to ks and we will be offering it as the alexandre-bennett amendment or as it will be known in utah the bennett for alexandre amendment. [laughter] there will obviously be a period of time before the stock can be distributed. he has anticipated roughly a year. in that period what i hear the secretary of the treasury will be in charge of controlling the stock. so my amendment will give the secretary of treasury my portion of this amendment will give the secretary the same fiduciary responsibility that any director or offical in a company would have. now we talk about conflict of interest in washington agreed
deal and conflict of interest isn't a good thing. the secretary of treasury finds himself in a position of conflict of interest. he has his interest as the chief financial officer if you will of the federal government and conflict of that with his position running an auto company at least overseeing the running of an ogle company. the president of the united states has said we don't want to run an ogle company so i say good for you, mr. president. we will set up a circumstance with this amendment where the secretary of the treasury has the responsibility to the shareholders the same as if he were a ceo or a member of the board of directors of a private company. and therefore in discharging that fiduciary responsibility we have removed the conflict of interest and have made it clear he will be subject to the same kind of laws and regulations and
perhaps shareholder lawsuits that anyone would be in a position of fiduciary responsibility of a company. i fink by doing that i will spur the desire of the secretary of treasury to comply with senator alexanders part of the amendment and get rid of this stock as fast as he possibly can and getting it to the american people who have paid for it strikes me as a good idea. another portion of my amendment says no more t.a.r.p. money can go to a bankrupt company. the t.a.r.p. mauney was sold to the congress as acquiring assets, not as acquiring stock positions in various companies. and particularly not in acquiring stock position in a bankrupt manufacturing company. when we approved t.a.r.p. the first time around we did it with the understanding it was dealing
with a credit crisis and the financial meltdown we were facing around the world. and instead, the t.a.r.p. money has gone into these bankrupt companies and once again the question of conflict of interest on a and saying there must be no conflict of interest with respect how the t.a.r.p. money is being spent. so the treasury secretary says well, wearing my hat looking out for the benefit of general motors on an going to suddenly switch and take my hat as the treasury secretary and determine some t.a.r.p. money is coming to go to relieve my problems as an executive overseeing the auto companies. so those are the two aspects of the addition of ibm making to senator alexander's amendment, number one, we are giving the secretary of the treasury the same kind of fiduciary responsibility and therefore exposure any officer or director would have with a corporate opportunity and at the same time we are saying no more t.a.r.p.
money, mr. secretary, whichever hagee you may be wearing can go to one of the bankrupt of companies. senator kyl has joined. >> i support the kyl-bennett -- just kidding. [laughter] the joint to excellent ideas together on something critical. first american people are really fed up with this notion of the federal government taking over business and running those businesses. and part of this is response to that, but there is a very good governance aspect of this i want to bring to your attention. you know, the government of the united states of america is made up of the people. the people came first. adis week, the people come to form the union and get the government some of our rights and then we will see where it goes from there. so the people are the government of the united states. when we talk about the government owning something it is the people who own it and so
it is the people who should have share of stock, not the government. and that is the first great idea here. that the stock in this company the people now alone would be held by the people. now it's not just an abstract notion. the second important reason for what senator alexander is doing and senator bennett delude to this is that it would not be a good financial thing for the united states government to have to sell off all this stock and a relatively short period of time, and of course we don't want the government to hold the stock a long period of time. why? because it essentially is a fire sale. everybody knows the government has done on wood 60% of the company so what are they going to do? rush out and pay high dollar? no, they are going to pay low dollar. the valley of the government would get back would not represent the true all-time nfl you weie