U.S. governors press for alternative to impending spending cuts

They are asking that any plan addressing the deficit should also help states save money, give them flexibility in deciding which areas to cut in their states, and not shift costs onto their budgets, said Governor Mary Fallin, a Republican from Oklahoma.

Sequestration was designed as a threat by Congress, which set itself a deadline in the fall of 2011 to agree on spending reductions. Because it missed the deadline, a scheme of automatic cuts decided by formula kicked in.

"We should all remember that sequestration was originally designed by Congress as something so odious, so repellant that it would force both sides into a compromise," said Governor John Hickenlooper of Colorado, a Democrat. "There can be no question that this is something nobody wants."

'DOUBLE WHAMMY'

During and after the 2007-09 recession, states' revenues plummeted to lows not seen in decades, while newly jobless and homeless residents turned to the their governments for help. Only in the last year have their revenues returned to pre-recession levels and spending demands eased. Many governors see sequestration as a threat to their slowly improving economies.

The two main sources of federal money for states - Medicaid, the healthcare program states run with federal reimbursements, and highway funding - are exempt from sequestration.

The remaining programs that are subject to sequestration directly provide on average 6.6 percent of states' revenues, according to Pew Center on the States. In South Dakota, they provide 10.3 percent.

The federal government, by employing people and buying goods and services, also plays an indirect role in states' economic fortunes.

On average, federal spending on procurement, salaries and wages within a state represents 5.3 percent of its gross domestic product, according to Pew. For Virginia, Washington, D.C. and Maryland, federal spending has the most economic impact, making up 19.7 percent of their GDP.

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