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More than they have in decades, states are turning down federal money because of the burdens that go with it (see below). Yet the feds then turn around and give the money to other states, which makes little sense with a deficit this year of $1.65 trillion.
So we’re happy to report that Congressman Denny Rehberg of Montana and Senator Marco Rubio of Florida have introduced legislation requiring the federal government to dedicate all unspent grant money from states to federal debt retirement. The Refund Act would give states greater incentive to return dollars to Washington, assuring state taxpayers that returned funds wouldn’t merely be shipped to less frugal states.
The perversity of the current incentives was highlighted by a political spat this year in Montana between the Republican legislature and Democratic Governor Brian Schweitzer. The legislature voted to return $120 million in federal funds for such programs as food stamps, home energy assistance and collecting patient medical care records under ObamaCare. The lawmakers worried that federal “maintenance of effort” rules would make it harder to cut spending in the future.
Mr. Schweitzer refused to return the money. The Helena Independent Record reported: “The governor said it makes no sense for Montana to turn away the federal money because it will just be reallocated to other states and won’t reduce the federal deficit at all. ‘We get less, and they get more,’ Schweitzer said.”
That incentive would be reversed under the Rehberg-Rubio bill. “It’s really very simple,” says Mr. Rehberg. “If a responsible state like Montana tightens its belt to save tax dollars, we shouldn’t be rewarding irresponsible states like California by adding those savings to their take.”
Montana never did return that money to the Treasury and now we’re all $120 million greater in debt. Congress has long rigged the budget rules to encourage more taxing and spending. It’s time to change those incentives.