Washington watch: 10 top issues for states: state lawmakers have to keep an eye on Congress this session defending against unfunded mandates and preemption.

• Author: Wyatt, William

Washington's budget deficit reduction plans end up costing states money. Concerns about cost shifts and preemption will be the predominant themes for state legislatures when Congress reconvenes this month.

"Congress seems to be exporting the federal deficit to the states," says West Virginia Delegate John Doyle, chair of the NCSL Standing Committee on Budgets and Revenue.

"States can ill afford to cover the cost of Washington's refusal to make difficult budget decisions," he maintains.

States again will have their work cut out for them during the 2006 congressional session defending against unfunded mandates, cost shifts and preemption of state authority and countering the "federal deficit export phenomenon." Here are the top 10 issues they'll be watching.

(1) UNFUNDED MANDATES

At the current rate, Congress will spend more than $300 billion of state money over the next 10 years through unfunded mandates and cost shifts. This estimate is conservative. Doubling it is neither unrealistic nor improbable.

The Unfunded Mandate Reform Act of 1995 (UMRA) was enacted when reducing the federal deficit and balancing the budget was a federal priority. The law was designed to reduce the number of congressional proposals that would pass costs to states.

Now that budget priorities have changed and the federal budget deficit is on the rise, so too are attempts inside the beltway to shift the costs of many programs to states.

For FY 2004 and 2005 collectively, federal programs cost state and local governments at least $51 billion. Because UMRA has limited applicability, costly federal programs like the No Child Left Behind Act, the Individuals with Disabilities Education Act (IDEA) and the Medicare prescription drug program all contain sizeable cost shifts that fly under the UMRA radar screen.

"Many programs are designed to be state-federal partnerships," Delegate Doyle says. "The problem is these partnerships are out of balance. UMRA has been an effective tool to control cost shifts in the past and with a little work, it can be so again."

State lawmakers will seek to alter UMRA this year, changing the definition of an unfunded mandate. Just including conditions of grant aid, as found in No Child Left Behind, for instance, would make UMRA a far more effective tool for state legislatures.

(2) STREAMLINED SALES TAX

Eighteen states have changed their sales and use tax codes to comply with the Streamlined Sales and Use Tax Agreement that went into effect in October. The strictly voluntary agreement is designed to create simplicity...