by Erin Madigan and Eric Kelderman - Republicans made the case this week for a second term for President George W. Bush, saying his policies already are helping states' budget prospects and will help states deal with the ongoing challenges of health care costs and job growth.

Stateline.org - Bush formally accepted his party's nomination at the Republican National Convention Thursday in a speech that sketched out his domestic agenda for a second term, including plans to simplify the tax code, allow people to save tax-free dollars for Social Security and require a nationwide high school graduation exam.

"Many of our most fundamental systems - the tax code, health coverage, pension plans, worker training - were created for the world of yesterday, not tomorrow," Bush said.

In Bush's first four years in office, domestic and state initiatives largely have been overshadowed by the White House's focus on national security concerns and the war on terrorism. Still, aided by a Republican-controlled Congress, Bush delivered on campaign promises on the domestic front to cut federal taxes to stimulate the economy, improve Medicare benefits and make public education more accountable.

Those initiatives carried mixed blessings at the state level, where officials have spent much of Bush's first term navigating the worst fiscal crisis to hit state budgets in decades in the wake of the high-tech bubble burst, corporate scandals and the terrorist attacks of Sept. 11, 2001.

Bush credits his federal tax cuts with sparking an economic recovery, creating jobs and lifting state economies, as well. Yet states also paid a price for the tax cuts; cuts in U.S. income and estate taxes triggered cuts in revenues from state taxes pegged to the federal rates.

In recent months, state tax revenues indeed have ticked up, putting state budget projections largely in the black again even though not yet providing enough cushion to restore budget-balancing cuts in state programs and services.

Similarly, Bush's highest profile domestic initiative - passage of the No Child Left Behind education reform law -- aims to raise standards for public school children nationwide. Yet it sparked a backlash among some Democratic and Republican state lawmakers for intruding on state policies and foisting, according to some estimates, $9.5 billion in extra costs on states this year.

The Bush administration's Medicare initiative for the first time provides a prescription drug benefit for senior citizens. States, though, are wary they may end up shouldering a large share of the program's cost.

As a former Texas governor, Bush campaigned in 2000 on pledges to preserve states' rights and oppose costly mandates from the federal government. Yet his education law seems to run counter to those promises, and critics question Bush's commitment to states' rights.

Thomas Mann, a senior fellow at the Brookings Institution in Washington, D.C., says that Bush has forgotten states' needs and has "no heartfelt federalism agenda" to shift power to states. "He's moved from Austin to Washington, and he's left state government far behind," said Mann, whose think tank helped host a seminar in New York this week on how Bush would govern in a second term.

But U.S. Health and Human Services Secretary Tommy Thompson, a former Wisconsin governor, was adamant that states' needs are a high priority for Bush. "There's been more help for the states under this administration than ever before. There's been more input from states in regards to developing policy than ever before," said Thompson, one of four governors who have served in Bush's cabinet.

A prime example of help to states is the $20 billion lifeline the White House threw states in 2003 - albeit reluctantly -- as part of the Bush tax-cut package. The one-time bailout was offered to help states fill deep budget deficits and cover burgeoning Medicaid bills.

On the flipside, though, the bi-partisan National Conference of State Legislatures estimates that new mandates imposed by the federal government, including the No Child Left Behind law, are running up $31.9 billion in extra costs that states will have to cover this year.

The Bush administration has "sometimes by design and sometimes by indifference" trampled states' rights, said Michael Greve, a federalism scholar at the American Enterprise Institute, another Washington think tank.

David Gergen, a professor at Harvard University's John F. Kennedy School of Government who served as an advisor to presidents Richard Nixon, Gerald Ford, Ronald Reagan and Bill Clinton, said Bush has been and likely will be preoccupied with foreign affairs. "Bush has worked with the (states) on homeland security; he's worked with them on No Child Left Behind. But we've had presidents in the past who have been much more domestically oriented, whose work with the governors has been much more intense," Gergen said.

Economy and Jobs
The $20 billion federal bailout to states was a one-time deal, and Bush has stated no plans for further handouts. On the other hand, his opponent, Massachusetts Sen. John Kerry (D), is proposing to dole out $25 billion over two years to help cover "painful budget cuts" states had to make as a result of Bush fiscal policy.

Some Republicans said states shouldn't rely on federal help. "I disagree with this notion that the federal government has to bail us out of self-inflicted wounds on spending problems," said South Carolina Gov. Mark Sanford (R).

Bush is pushing to make his federal tax cuts permanent, something GOP governors said would give relief to small businesses and promote job growth. "We believe that (Bush's) vision of lower taxes, less regulation and a level playing field for international trade is the right way to sustain economic recovery and restore full prosperity to all parts of the state," Ohio Gov. Bob Taft (R) told Stateline.org.

Health Care
Bush wants to build on one of his administration's chief successes, a new Medicare prescription drug benefit. However, the law failed to deliver on a key provision that states asked for: having the federal government pick up the prescription drug tab for poor senior citizens who are eligible for both Medicare and Medicaid.

The president said he'll continue to help states strengthen public health programs by giving states greater flexibility to expand coverage for children and the poor. However, Bush has clashed with states over Medicaid expenses, which are split between each state and the federal government and are one of the fastest-growing expenses in state budgets.

Bush tried to overhaul Medicaid in 2003, but efforts stalled because governors rejected the administration's proposal to give states a form of block grant with greater spending flexibility. Health policy experts say it's unclear whether he'll try again.

The Bush administration also may be headed for a showdown with states over allowing less expensive prescription medicine to be imported from Canada. Although the administration currently says foreign drug imports are unsafe and illegal, a growing chorus of governors - four of them Republican - are calling on the federal government to legalize the practice.

Bush's laundry list of health proposals also includes plans to make health insurance more affordable by expanding "health savings accounts" and to control rising medical malpractice insurance premiums, which sparked debate and consumed lobbying dollars in statehouses across the country.

Education
Bush's signature education initiative, the No Child Left Behind Act, was staunchly defended at the convention, despite widespread complaints about the law earlier this year.

"No Child Left Behind was a very important step forward to end the fact that schools would allow particularly minority and poor students to pretend to get an education without any standards," said New York Gov. George Pataki (R).

The education law, which requires states to give annual reading and mathematics tests to students in grades three through eight and 10th grade, was enacted in 2002 with broad bi-partisan support and is the most sweeping federal education reform in nearly 40 years. Under the law, schools are penalized if the number of students who pass state tests does not steadily increase, including minorities, children who speak limited English and disabled students.

Bush officials challenge assertions that the law is underfunded and point to federal spending on major education programs, which has increased by an estimated 34 percent since No Child Left Behind was signed into law.

Social and Welfare Policy
The debate over legalizing gay marriage, which raged in state courts and legislatures this year, also proved controversial at the convention. Some moderate Republicans took issue with the official party positions opposing gay marriage, abortion and using federal dollars for stem cell research. Both Bush and Kerry have come out against gay marriage, but Bush has called for a federal constitutional amendment to ban it, while Kerry thinks the issue should be handled in the states.

On welfare reform, debate over Bush's proposal to impose stricter work requirements on welfare recipients has created gridlock in Congress and delayed the reauthorization of the 1996 Welfare Reform Act, which expired in 2003, leaving states uncertain about the future of their programs.

Environment and Energy
The main state-level impact of Bush's environmental policies has been on states' natural resources and energy production. Western states have been particularly affected by Bush's efforts to streamline logging projects in national forests with his "Healthy Forests Initiative," which aims to thin forests to prevent wildfires, and also by Bush's move to roll back a Clinton-era ban on building roads in protected wilderness areas.

Bush plans to keep pushing to open federal lands to oil and gas exploration. Both Bush and Kerry plan to expand coal mining and so-called "clean-coal" technology. Bush already eased restrictions on mountain-top mining in West Virginia, Tennessee and Kentucky.

The Bush campaign also is promoting his "Clear Skies" legislation that's intended to improve air quality by reducing power-plant emissions. However, many state air quality directors contend Bush's proposals weaken existing regulations, and Kerry has vowed to repeal them if elected.

Homeland Security
For states, effects of the war on terror are felt in increased expenses for homeland security and increased demands on National Guard troops, local part-time soldiers on whom states rely in natural disasters or emergencies but who are being activated for long duty in Iraq and Afghanistan. Some state officials fear that the long tours of duty will hurt recruitment and retention of guardsmen and leave states short-handed in a disaster, but major problems haven't yet arisen.

Stateline.org Staff Writers Kathleen Hunter, Kavan Peterson and Pamela M. Prah contributed to this report.

Send your comments on this story to Selected reader feedback will be posted in our Letters to the editor section.

Source: Contact Erin Madigan at or Eric Kelderman at © 2004 stateline.org