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CNN Live On Location - Transcript

Location: Columbia, SC


HEADLINE: Interview With Govs. Gray Davis, Mark Sanford

GUESTS: Gray Davis, Mark Sanford

BYLINE: Kyra Phillips

KYRA PHILLIPS, CNN ANCHOR: State leaders are now left to decide what programs and services to cut, and where to find the cash to cover government expenses. How will they do it?

California Governor Gray Davis joins us live from Sacramento, and South Carolina Governor Mark Sanford joins us live from Columbia.

Gentlemen, thank you both for being with me. Governor Davis, let's begin with you. What do you feel you are not getting from the president?

GOV. GRAY DAVIS (D), CALIFORNIA: Well, I would like to see a real economic stimulus package. The nation has lost over 2 million jobs over the last two years, stock markets have declined dramatically, and for any state that depends on income tax, that really matters. So we would like to see a stimulus package that creates jobs now, not years from now, and secondly, every state has had to bear, along with local government, the cost of homeland security, which we do without question, without hesitation, but we shouldn't have to do it without compensation.

So I hope he speaks to the need for an economic stimulus package, and reimbursing states and local government. In our case, at least $500 million a year, for protecting the homeland here in California.

PHILLIPS: So Governor Davis, you're saying you need cash?

DAVIS: Well—yes. We need help with additional burdens placed on us by a national recession and declining stock markets that affect our case loads and reduce our income, and the additional burdens placed on us by the attack on America on September 11.

PHILLIPS: Now, Governor Sanford, you take a bit of a different approach. You're not looking to Washington for money. Why not?

GOV. MARK SANFORD ®, SOUTH CAROLINA: Well, if you actually look at what happened over the last 10, the last 15 years in state governments across the country, what you would find is that in many cases, their budget literally exploded, and in as much as Washington may have been limiting, you had substantial growth in state governments.

So, what we are saying is simply give us the discretion to decide on where money ought to be spent. As Gray Davis or others will tell you, a large part of what is happening right now in state budgets is that they're driven by Medicaid.

We don't want more money, but what we do want is more discretion in how that money is spent, rather than a mandate from Washington. So again, look at inflation of state budgets across the country. You would see that states have, frankly, ballooned, and that we don't need more money, but we need more discretion at the local level.

PHILLIPS: Governor Davis, what do you think? More discretion?

DAVIS: Well, we could use all of the above, frankly. There are many federal requirements that require a state match. If they've waive the matching requirement for a year or two, that would not cost the federal government one additional dollar, but it would help us reprioritize here at the state level. That goes for transportation to health care, to a range of other issues where we have a sharing arrangement with the federal government. So yes, flexibility does help, but I do think we need to realize that, at a minimum, we're bearing the cost of homeland security from a direct attack on America, and these are costs typically borne by the Department of Defense.

PHILLIPS: Governor Sanford, are you bearing these extra costs? Do you feel you can't keep up with what you need to do with regard to homeland security?

SANFORD: Well, I wouldn't disagree with Governor Davis on homeland security. I think it is largely a federal function. The question is what part of the federal function is handled where. If you look at a lot of the local law enforcement efforts, those were efforts that were already in place before 9/11. And the question there, I believe, is are we simply going to tack yet another responsibility on the federal government? I think that homeland security comes down to a neighbor watching out for a neighbor's yard, and many of these are local functions that frankly should not be pulled up to the federal level.

So, again, don't take the authority up there, but as well, you know, don't give us money. Just allow us to continue to, frankly, practice homeland security in the way that it was before. On things that are new that have to take place post 9/11, then I would agree with Gray Davis that those expenses ought to be handled at the federal level.

PHILLIPS: Well, Governor Sanford, how do you avoid raising taxes, raising fees, raising tuition at state colleges. That seems to be the common way to make up for this lack of money.

SANFORD: I think it's the easier way. It's the way that politics normally go, but I think it would be a mistake. If you look at what the president is trying to do in lowering taxes, the reason he's trying to do that is so that you actually stimulate the economy. If all states go out there and do just the opposite at the same time, I frankly think it will dilute his ability and our nation's ability to really get the economic engine going again on all eight cylinders.

I think it is important that we act collaboratively in actually trying to limit spending. The thing that has gone out of control during the boom that took place over the last ten years were budgets, budgets at the federal level and particularly budgets at the state and local level. And so, it is our strong assumption—we are 30 percent, for instance, above the U.S. average on the cost of state governing in South Carolina. It is our strong assertion that if we reform the way that things are done, we can come up with those savings internally as opposed to looking to the federal government for yet more money.

PHILLIPS: Governor Davis, can you do that? It seems to make sense.

DAVIS: Well—I think all states ought to look at the possibility of structural reform. I said I would not sign a budget without structural reform. Meaning, I want to get the state off the roller coaster ride we have been on, good years with lots of money and bad years with no money. So you raise expectations, and then you have to dash expectations. And one way to do that is to have some sort of spending constraint so that in the very good years, money goes into a reserve to be drawn upon in bad years.

That sounds simpler than it is to draft, but I think one can be done that is fair, that weans us off of this feast or famine budgeting, which most states have experienced over the last several years.

PHILLIPS: Final—I am sorry, go ahead.

DAVIS: But I do think—I do think all states have experienced job losses, and have experienced the economic aftershocks of a recession, and they would benefit from some economic stimulus package in Washington.

PHILLIPS: Real quickly, final thoughts from both of you. Governor Davis, State of the Union speech tonight, what do you want to hear from the president?

DAVIS: Well, I hope that he makes a clear statement on the economy that we need to put people back to work. We need to reimburse the states for the additional cost of securing our ports, securing our airports, which are burdens we didn't have before 9/11. And then, on the Iraq question, that he is able to make a clear link between invading Iraq and our war against terrorism.

PHILLIPS: Governor Sanford, your final thoughts?

SANFORD: I would echo his sentiments. I think that ultimately this will be a speech about security, and security at a couple different levels. It would be about a family security economically, on how is it that we get the economy going again in the United States and in our respective states. How is it that we really provide security, given the strange number of different threats around the globe. And then, frankly, other branches of security, health, and other, but I think this will be a speech about security. I think that is what all 50 governors will be looking toward the president on.

PHILLIPS: Governor Mark Sanford, Governor Gray Davis. Gentlemen, thank you so much.

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