“The main message is that it’s important to remember that, on a lot of areas of governance, we’re partners — and that these issues can’t be solved simply by cost-shifting to the states, because the states aren’t really in a position to do all that,” said Gov. Jack Markell of Delaware, chairman of the National Governors Association. . . .
But there is a long history of the federal government’s giving short shrift to the needs of states and cities — by making cuts in federal aid that forced service cuts or tax increases at the local level, or by passing laws requiring localities to take expensive actions without giving them the money to do so.
So in recent days, more than a dozen mayors with the United States Conference of Mayors have gone to Washington to lobby lawmakers. And last Monday, Mr. Markell, a Democrat, joined several governors from both parties to discuss the issue on a conference call with Vice President Joseph R. Biden Jr.
The states, whose tax collections are still below the peak levels they reached in 2008, are in something of an unusual situation. That is because the automatic tax increases and spending cuts that are scheduled to begin in January, called “the fiscal cliff” by Ben S. Bernanke, the Federal Reserve chairman, are actually better for them in some respects than many of the alternate proposals in Washington.
Half of the cuts scheduled to take effect at the beginning of next year would be to military spending, which would affect states only indirectly. The scheduled cuts to domestic programs would leave Medicaid, the single biggest source of federal aid to states, untouched. And the planned federal tax increases would increase revenues in states whose tax codes are closely linked to the federal code.
But governors said that no one was rooting for President Obama and Republicans in Congress to fail to reach a financial accord, in part because they fear that the resulting combination of spending cuts and tax increases could prompt another recession, which their states can ill afford. . . . 
Pat McCrory, the Republican governor-elect of North Carolina and former mayor of Charlotte, said state and local officials needed a greater voice in Washington.
“I don’t think the debate should be just between the White House and Capitol Hill, but the state and local government should be at the table,” Mr. McCrory said. “Because I assume some of their answers are going to be pass-throughs to the states or to cities, as I saw as mayor in the past.”
The automatic cuts would hurt states in several areas. A recent analysis by the Pew Center on the States found that roughly 18 percent of the federal grant dollars flowing to the states would be subject to across-the-board cuts, including money for education, public housing and nutrition programs for low-income women and children.
But some governors fear that any “grand bargain” struck by Mr. Obama and Congress could lead to even deeper cuts to states, and they worry that it could include tax provisions that they believe would be harmful, like ending the tax-exempt status of municipal bonds that makes the bonds more attractive to investors.
But the needs of states and cities have often been an afterthought when Washington has talked about curbing spending.
Alice M. Rivlin, a former director of the Office of Management and Budget who served on two recent high-profile federal commissions — the National Commission on Fiscal Responsibility and Reform, better known as the Simpson-Bowles Commission, and the Bipartisan Policy Center’s Debt Reduction Task Force — acknowledged as much in an appearance this summer.
“I’ve served on not one but two commissions on the federal deficit,” Ms. Rivlin said when another group she belongs to, the State Budget Crisis Task Force, released a report warning of the fiscal problems facing states. “And I can attest that although we were certainly aware that the proposals we made would impact state and local government, we did not do a serious analysis of what would happen.”
Gov. John R. Kasich of Ohio, a Republican, has been on both sides of the federal-state divide: trying to cut the federal budget as a chairman of the House Budget Committee, and now seeking to preserve services, especially for the poor, as a governor.
“I’m just saying that if you’re going to affect us, you’d better realize there’s a bottom line that affects flesh and blood and real people,” he said this month at a meeting of the Republican Governors Association. “And you can easily throw every one of these budgets into the red by just trying to get a nice number.”
The absence of a formal dialogue between the federal government and the states was cited as a danger by the State Budget Crisis Task Force, a private group led by Richard Ravitch, a former lieutenant governor of New York, and Paul A. Volcker, a former chairman of the Federal Reserve.
“There are no standing structures and procedures within the federal government for analyzing the impacts on states and localities of reduced federal spending or federal tax changes, and there is little dialogue about these issues between the federal government and state and local governments,” its report said last summer. . . .      
“No matter what happens in Washington, it’s going to hit state and local governments very hard,” said Mr. Kincaid, who is now a professor of government and public service at Lafayette College in Easton, Pa. “I think, by and large, states have become accustomed to this pattern of decision-making, so they’re going to brace themselves for whatever comes. State and local officials will lobby very hard to get what they can out of this bargain, but they won’t be all that significant as players.”"
SUMMING UP  
The day of financial reckoning throughout the U.S. is inching closer and closer. It will arrive in full force in 2013.

As our national politicians finally address the country's seemingly insoluble debt and deficit issues, the budgets of schools, states and cities will suffer as a result.
The problem is simple. One dollar is only and always 100 cents. Trying to spend that same 100 cents several different times and in several different ways doesn't make the dollar grow. It's still just a dollar. It just makes deficits and debt grow. And that debt is real and must be repaid down the line.
The longstanding pretend way of balancing state and city budgets by applying for and receiving federal funds, which in fact often originated in China and other countries, didn't serve a useful purpose. It was in effect 'play' or monopoly game money.

But it was even worse than that as it just 'painlessly,' at least for the moment, increased the national debt. So that $16 tillion and growing national debt chicken is coming home to roost in 2013. And the states and cities will share that financial pain in a big way.
Of course, none of this addresses underfunded federal entitlelements such as Social Security and Medicare. For that matter, neither does it address underfunded public sector retirement obligations at the state and city levels either.
A healthy long term mixture of real 3% or higher economic growth led by the private sector, reduced entitlements, government downsizing and increased taxes, including increased taxes on the middle class, provide the only realistic answers to all these problems.
But these are exactly what We the People don't fully realize we need and certainly don't want. Accordingly, the politicians are extremely reluctant to recommend the medicine we eventually will have to take. The time for partisan and parochial game playing is over.

We the People must make hard choices. In a nutshell, we must accept higher taxes across the board, and not just on the rich, or agree to seriously reduced entitlements across the board. And the vilification of the private sector must stop if we're ever to get back to the totally necessary 3% rate of annual GDP growth we need to get our financial affairs in order as a nation.

In other words, the non-free freebies are about to come to an end. The math simply doesn't work otherwise.
So stay tuned. The problems associated with the aftereffects of the 'cliff' will soon be coming to a neighborhood near you.
Isn't life interesting?
Thanks. Bob.