Angelides to Lobby Feds for Funds

California Treasurer Philip Angelides will lead a delegation of economists and other officials to Washington today to push for more federal dollars for investments in schools, transit and other public projects.

The three-pronged proposal calls on the federal government to kick in more than $150 billion to help state and local governments avoid a fiscal meltdown and build infrastructure.

It would do so in part through credit enhancements that would enable the country’s massive $2-trillion public pension fund system to invest in such projects.

The ideas were hatched last month at a meeting of state officials, pension-fund and private-sector leaders hosted by New York Comptroller H. Carl McCall, investment banker Felix Rohatyn and Angelides.

The plan is being supported by Texas economist James Galbraith and Stephen Levy, director of the Palo Alto-based Center for Continuing Study of the California Economy.

Both Galbraith and Rohatyn, the former Lazard Freres banker who helped bail out New York in the 1970s, are among those joining Angelides in Washington today to push the cause, as is Dana Mead, former chairman of Tenneco and the Business Roundtable.

But the pitch to lawmakers and top labor leaders--scheduled for today through Friday--comes at a difficult political time. The budget unveiled by the Bush administration this week calls for severe belt-tightening to support increases in defense and homeland security.

The economic stimulus package debated in Congress late last year was too mired in partisan conflict to pass. Lobbying efforts by state and local governments for fiscal relief have met with resistance. And flickering signs of economic recovery will probably worsen the group’s prospects, said Peter Orszag, an economist at the centrist Brookings Institution think tank who reviewed the proposals.

“While it is undoubtedly well-intentioned, its political viability is basically zero at this point,” Orszag said. “We do face critical infrastructure needs. There is a danger the recession will still turn out to be worse than we expect. But if this had appeared five months ago, it would likely have been much more effective in the political sphere.”

Angelides conceded that promoting the plan will be an “uphill battle,” but said the message should be relayed to lawmakers.

“We feel our obligation is ... to talk to policy leaders in Washington about ... the risk that we continue to see in the economy.”

Infrastructure investment, many agree, helps create jobs in the short term while providing long-term economic enhancements. Franklin Roosevelt embarked on a public works program during the Great Depression, and Dwight Eisenhower signed the Federal-Aid Highway Act of 1956, creating the interstate highway system.

“Historically, it has been helpful, and it could be helpful now,” said McCall, who was unable to join the delegation. “Unless we have economic activity at the state level, we will not have an economic recovery.... Helping the states toward some economic revival is critical.”

The dialogue grew out of the Sept. 11 disaster and began with McCall and Rohatyn. They asked Angelides to join the discussion, and all soon realized they would fare better if the issue were tackled nationally, Angelides said.

State treasury and other officials from New York, Maine, North Carolina, Oregon, Florida and Massachusetts as well as representatives of labor unions and key public pension funds attended meetings in December and January to hone the proposals.

They include:

* A call for $10 billion in federal grant funds annually for five years, to be used in part as credit enhancements or guarantees for state and local infrastructure projects. Those enhancements would enable the state’s public pension funds to invest in the capital projects, including school construction and repair, light rail and other projects. The grants could also be used for equity investments in real estate or other development projects.

* A call for an increase by $5 billion annually over the next three years in the amount of tax-exempt bonds that state and local governments can issue for private-sector community development projects, such as affordable housing and cleanup of contaminated development sites.

* A call for $100-billion one-year fiscal assistance for states and local governments to avert massive upcoming budget cuts that probably will stall capital improvement programs for years.

The proposal’s price tag seemed unrealistic to several budget watchers, given that states are in danger of losing billions of dollars in transportation funding.

“If you’re coming [to Washington], I’d say you better come just to keep what you had,” said Michael Bird, federal affairs counsel for the National Conference of State Legislatures, adding that even in times of surplus requests for federal financing of high-speed rail have been stymied.