National Conference of State Legislatures
Council of State Governments
National Association of Counties
U.S. Conference of Mayors
National League of Cities
International City/County Management Association

April 12, 2005

RE: FY2006 Budget Resolution, H.Con.Res 95 and S.Con.Res 18

Dear Conferees:

The national associations representing state and local governments recognize the essential need to reduce the federal budget deficit. Nowhere are these choices more difficult, more critical or more complex than those regarding intergovernmental programs. As the budget conferees consider the FY2006 Budget Resolution, we urge you to be mindful of the effects that federal budget decisions have on state and local government budgets and to avoid exporting the federal deficit to the states and localities through unfunded mandates and other cost shifts. Although our varied organizations have varied budget priorities critical to our memberships and the constituents that both we and you represent, we ask you to consider the following two recommendations as you conference:

• Maintain the federal government's fiscal commitment to the Medicaid program and its beneficiaries. Support the creation of a commission to examine Medicaid and oppose including reconciliation instructions requiring cuts to the Medicaid program. Medicaid services must continue to be provided to low-income individuals who need them. Medicaid is a critical component of our nation's economic recovery, providing health care to those who have lost jobs or whose employers no longer provide health care benefits. However, neither reform nor efficiencies should be included in the budget resolution or reconciliation process if they directly or indirectly shift additional costs to states and localities or impose unfunded mandates. In addition, the Medicare Modernization Act (MMA) makes changes to the Medicaid program that will increase state expenditures. For example, all prices negotiated under the MMA are not included in the calculation of the Medicaid "best price." States will find it more difficult to negotiate supplemental rebates because the dual-eligibles will no longer be a part of their prescription drug portfolio. Indexing the Part B premium will also result in increased state costs and states expect to see increased administrative costs related to the requirement to conduct eligibility determinations for the low-income subsidy for Medicare Part D. We urge you to take these costs into consideration as you act on the budget resolution. States are required to conduct eligibility determinations for the new program as a condition of receiving federal matching assistance payments (FMAP). All of these program-related needs should be funded in the FY2006 budget resolution as we address numerous unanswered questions regarding the "clawback" provision.
  
  
• Maintain the federal government's commitment to the Community Development Block Grant Program (CDBG). Continued support of the CDBG program remains critical in order to maintain essential services aimed at neighborhood revitalization. The CDBG program serves our nation's community and economic development needs and provides a vital role in assisting the more vulnerable members of these communities. By a 68-31 supermajority, the Senate overwhelmingly approved an amendment by Senator Coleman supporting full CDBG funding and maintaining the program's existing structure within the Department of Housing and Urban Development. Language in the amendment opposed the Administration's proposal to move CDBG to the Department of Commerce under the Strengthening America's Communities Initiative (SACI). Efforts to consolidate CDBG and seventeen other federal government programs and reducing funding by over 30% produce no real savings given the amount of leveraging that the program produces. In addition, changing the program's focus to an economic development effort alone, ignores other core functions of the program, such as the delivery of needed social services and housing production.

We appreciate your consideration of our concerns and are willing to work closely with you to address issues related to the FY2006 Budget Resolution.

Respectfully,