The National Association of State Budget Officers will host a Webinar and Conference Call on The Economic Outlook with Nigel Gault, Managing Director of the North American Macroeconomics Group, Global Insight on Wednesday, January 14, 2009 at 3:00pm Eastern Time. The call will provide ample time for questions and answers after Nigel Gault’s presentation. Visit http://www.nasbo.org/members/conferencecalls.php for information on how to access the call.

For further information contact Brian Cheung at (202) 624-8433.

Each year the President-Elect and Member-at-Large are elected at the NASBO Spring Meeting.  The President-Elect assumes office this summer at the Annual Meeting in Virginia and becomes President at the 2010 Annual Meeting.  The Member-at-Large serves a two-year term beginning this summer.  If you would like to nominate a member for either position, please forward the nomination to Stacey Mazer at smazer@nasbo.org or fax your nomination to her at (202) 624-7745.  Nominations must be received by Monday, February 23, 2009.

NASBO is also seeking nominations for the ninth annual Gloria Timmer Award for NASBO members, the George A. Bell Service Award for NASBO associate members, and the four regional awards: Robert M. Armstrong Midwestern, J.H. Rester Southern, Fred W. Links Western, and John E. Burton Eastern also for NASBO associate members.  There are often a number of budget analysts who merit recognition for exceptional effort and performance.  Please take a moment to consider nominating one of your staff members.  Budget office staff should also consider nominating their director or deputy for either a single significant achievement or a career of accomplishments.  All nominations must be received by Monday, February 23, 2009.

Link: Award Criteria and Nomination Forms

The 111 th Congress is scheduled to be sworn in tomorrow January 6, and is expected to begin work immediately on an economic recovery package, expected to cost around $700 billion (see below). The new Congress may also have to vote on a request by the current administration on whether to release the second half of the $700 billion bailout fund, as the Treasury Department has spent the first allotment of $350 (see below). Congress will most likely wait until after a stimulus package is approved before turning their attention to completing action on the remaining fiscal 2009 spending bills, as only one of the twelve spending bills has been signed into law.

While there are still many details that have yet to be worked out, several announcements last week began to give some indication of the size and scope of the expected economic recovery package. First and foremost was the statement by Senator Chuck Schumer (D-NY), who stated on December 29 that the stimulus package would likely contain between $80 and $100 billion dollars in Medicaid assistance. The increased funds would come through state federal medical assistance percentage (FMAP). However, there are two methods currently being discussed for determining the specific increases in a state’s FMAP: an across the board increase for all states or a tiered system that is based on the severity of the economic downturn in each state, which would likely be tied to such indicators as the number of foreclosures, food stamp participation rates, and a state’s unemployment rate. Second, David Axelrod, an advisor to President-elect Obama, said on December 28 that the proposed economic stimulus plan would likely be in the range of $675 billion to $775 billion and would include significant funding for a “middle class tax cut.” The tax cut is expected to cost around $300 billion and would reduce taxes for workers and businesses by providing credits up to $500 for most workers, costing roughly $150 billion while also including more than $100 billion in tax incentives for businesses such as allowing businesses to apply net operating losses from last year to offset tax liabilities from prior years. However, the method of this tax cut is still under debate, with some economists arguing that providing taxpayers with a one-time tax cut, similar to the first economic stimulus passed in February 2008, would result in many taxpayers saving a large percentage of their tax cut or using it to pay down debt. Rather, these economists argue that a tax cut should be provided in small doses, such as a slight increase through one’s paycheck, in order to encourage a higher rate of spending, as research has shown that people are more likely to spend their tax cut if it comes in the form of an extra $15 dollars every two weeks, rather than a one-time $500 check. Additionally, chairman of the Senate Judiciary Committee Patrick Leahy (D-VT) stated on December 30 that he is seeking additional funding for local law enforcement to be included in the stimulus. He noted that the Judiciary Committee would discuss whether to increase funding for the Community Oriented Policing Services (COPS) and Byrne grant programs at its first hearing currently scheduled for January 8. In an earlier version of the economic stimulus from October, which was rejected by the Senate, a total of $490 million was included for Byrne grants. President-elect Obama is scheduled to meet today, January 5 with congressional leaders, including House Speaker Nancy Pelosi (D-CA), Senate majority Leader Harry Reid (D-NV), Senate Minority Leader Mitch McConnell (R-KY) and House Republican Leader John Boehner (R-OH) to discuss certain specifics on the expected stimulus.

Alternatively, House Republican Leader John Boehner (R-OH) offered an alternative stimulus plan on December 29. The major highlights of his proposal include doubling the child tax credit, suspending capital gains tax for two years, allowing small businesses to write off additional expenses, providing net operating loss rules for all employers, reducing the corporate tax rate to 25 percent, and increasing the number of sources of American-made energy. He also stated that any stimulus package should be presented at public hearings before being brought to the floor, which could delay its passage past January 20, when President-elect Obama will be sworn in. However, House majority leader Steny Hoyer (D-MD) warned last week that a package in the range of $750 billion may take longer to review and may not be ready for President Obama until early February.

PAs the Treasury Department agreed to commit $6 billion in funds to GMAC on December 29, the department has now officially allocated more than the $350 billion in funding they were allotted by Congress in the first half of the financial bailout bill. Although they have technically allocated more than $350 billion, Treasury officials have stated that they have not actually spent the entire $350 billion and therefore were able to extend funds to GMAC. With no funding left, the likelihood that the administration will request the second half of the $700 billion bailout has increased significantly. However, there are a number of political realities that are standing in the way of making such a request. The biggest obstacle has been numerous calls by many members of Congress to ensure that a significant portion of the funds from the second $350 billion would be allocated to help mitigate foreclosures. House Financial Services Chairman Barney Frank (D-MA) is slated to release language in early January that would impose significant restrictions on how the second $350 billion could be allocated. Additionally, there is the fear that a drawn out fight over the release of the funds could significantly harm world markets. Congress would have 15 days to vote on the request, and would need a two-thirds majority to deny the administration’s request. The House Financial Services Committee is scheduled to meet January 10 to discuss the priorities for the next administration in using the funds from the Troubled Assets Relief Program.

State Laws Related to Immigrants and Immigration in 2008, National Conference of State Legislatures

On December 30, Standard & Poor’s released its monthly update for the S&P/Case-Shiller Home Price Indices, which showed that housing prices declined 2.2 percent in October for the 20 largest metropolitan areas. The 20 city index also showed that the price of a single family home is down 18 percent from a year ago, and that 14 of the 20 areas measured were experiencing record decline in housing prices. The smaller 10 city index has declined 19.1 percent over the same period, the largest decline in its history. The vast number of unsold houses continues to weigh down the market, and as unemployment may rise to between 8 and 10 percent next year, the housing market will likely deteriorate further in 2009.

Link: S&P/Case-Shiller Home Price Indices

On December 30, the Conference Board released its December reading for its monthly consumer confidence survey, which showed that the index declined to a reading of 38 from 44.7 in November, an all time low. The previous low of 38.8 was registered in October. Analysts and forecasters had been expecting a slight increase to 45.5. The number of consumers who expect business conditions to worsen going forward increased to 32.8 percent from 28.3 percent, although those expecting conditions to improve also increased to 13.4 percent from 11.5 percent. The share of consumers expecting fewer jobs in the coming months increased to 41 percent from 33.7, a sign that many consumers expect the labor market to continue to contract for the next several months.

Link: Consumer Confidence Press Release

The Department of Labor reported on December 31 that for the week ending December 27, initial jobless claims fell by 94,000 to 492,000. The decrease in initial claims was the first time in eight weeks that the figure dropped below 500,000. However, continuing unemployment insurance claims rose 140,000 to 4,506,000 for the week ending December 20. Many economists and forecasters expect the labor market to continue to weaken, and will be closely watching when the Department of Labor releases December’s unemployment figures on January 9.

Link: Department of Labor News Release