Five Democratic governors are asking the federal government for a $1 trillion boost, including $250 billion for education and $150 billion in middle-class tax cuts.
The governors from Wisconsin, Massachusetts, New Jersey, New York and Ohio on Friday said they have presented their plan to President-elect Barack Obama's transition team as well as congressional leaders.
They said that level of federal aid is needed to deal with unprecedented state budget shortfalls in 41 states and Washington, D.C., that the Center on Budget and Policy Priorities pegged at $42 billion for the current fiscal year alone.
Wisconsin Gov. Jim Doyle said congressional leaders and the Obama team have been receptive to the governors' ideas.
"That's not to say they've told us this is what they'll do or they're with us all the way," Doyle said. He also said other governors were involved in creating the plan, which grew out of an early December meeting that Obama had with the nation's governors.
Obama's aides and congressional leaders have been talking about a package roughly half the size of the two-year plan the five governors proposed Friday.
Over two years, $1 trillion is equal to more than 3 percent of the gross domestic product, the U.S. economy's total output. A package of that size is likely to draw significant opposition from congressional Republicans and concern from moderate and conservative Democratic lawmakers who oppose large budget deficits.
Republican Governors Association executive director Nick Ayers issued a statement calling the plan a bailout for the financially strapped states. While the governors argued the money was badly needed to help solve their budget problems, they said it was not a bailout.
In addition to the money for education and tax cuts, the governors said their plan includes $350 billion for road construction and other infrastructure projects and $250 billion for social service programs such as Medicaid.
"The idea is to put people to work and to put them to work in ways that build on a stronger, long-term economic platform for future growth," said Massachusetts Gov. Deval Patrick. "Any economic recovery bill in our view passed by Congress should be bold enough to have a psychological impact and well as an economic one."
The governors all said their states are facing unprecedented budget shortfalls that will require deep cuts to services and possibly irreparably harm their education systems.
"We aren't crying wolf," Ohio Gov. Ted Strickland said. "These are real circumstances, unprecedented situations we are facing."
Ohio's budget deficit could grow to $7.3 billion even after $1.9 billion was cut from its current budget, Strickland said.
In Massachusetts, Patrick has already made $1.1 billion in budget cuts and said Tuesday an additional $1 billion in cuts may be needed in what started as a $28.1 billion budget for the 2008-2009 fiscal year.
New York Gov. David Paterson said his state faces a $15.4 billion deficit. Wisconsin's budget is expected to be $5.4 billion short by mid-2011.
New Jersey Gov. Jon Corzine said he had just left a meeting with state legislative leaders where he proposed $2.1 billion in cuts on top of $600 million that's already been cut from the budget.
Strickland said the federal stimulus is needed to help bridge the gap from the current recession to when there's a rebound. Even with the money, states will have to make deep cuts, he said.
"We are not, any of us, talking about federal money to expand spending, expand programs, to do new things," Massachusetts Gov. Deval Patrick said.
A forecast from Global Insight shows that the economy hasn't hit bottom yet.
National economic growth is now expected to drop 1.8 percent this year, rather than increase 1 percent. The U.S. labor market is expected to lose 3.7 million jobs during the downturn, with unemployment reaching 8.7 percent in the first half of 2010, it said.
That forecast assumes there will be a $550 billion federal stimulus package, roughly half of what the governors requested.
This program aired on January 2, 2009. The audio for this program is not available.