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Cooper writes: "States are increasingly alarmed that they could become collateral damage in Washington's latest fiscal battle, fearing that the impasse could saddle them with across-the-board spending cuts that threaten to slow their fragile recoveries or thrust them back into recession."

States are scared that cuts in aid from the federal government will hurt their economies. (photo: Getty Images)
States are scared that cuts in aid from the federal government will hurt their economies. (photo: Getty Images)

Fear of US Cuts Grows in States Where Aid Flows

By Michael Cooper, The New York Times

23 February 13


tates are increasingly alarmed that they could become collateral damage in Washington's latest fiscal battle, fearing that the impasse could saddle them with across-the-board spending cuts that threaten to slow their fragile recoveries or thrust them back into recession.

Some states, like Maryland and Virginia, are vulnerable because their economies are heavily dependent on federal workers, federal contracts and military spending, which will face steep reductions if Congress allows the automatic cuts, known as sequestration, to begin next Friday. Others, including Illinois and South Dakota, are at risk because of their reliance on the types of federal grants that are scheduled to be cut. And many states simply fear that a heavy dose of federal austerity could weaken their economies, costing them jobs and much-needed tax revenue.

So as state officials begin to draw up their budgets for next year, some say that the biggest risk they see is not the weak housing market or the troubled European economy but the federal government. While the threat of big federal cuts to states has become something of a semiannual occurrence in recent years, state officials said in interviews that they fear that this time the federal government might not be crying wolf - and their hopes are dimming that a deal will be struck in Washington in time to avert the cuts.

The impact would be widespread as the cuts ripple across the nation over the next year.

Texas expects to see its education aid slashed hundreds of millions of dollars, which could force local school districts to fire teachers, if the cuts are not averted. Michigan officials say they are in no position to replace the lost federal dollars with state dollars, but worry about cuts to federal programs like the one that helps people heat their homes. Maryland is bracing not only for a blow to its economy, which depends on federal workers and contractors and the many private businesses that support them, but also for cuts in federal aid for schools, Head Start programs, a nutrition program for pregnant women, mothers and children, and job training programs, among others.

Gov. Bob McDonnell of Virginia, a Republican, warned in a letter to President Obama on Monday that the automatic spending cuts would have a "potentially devastating impact" and could force Virginia and other states into a recession, noting that the planned cuts to military spending would be especially damaging to areas like Hampton Roads that have a big Navy presence. And he noted that the whole idea of the proposed cuts was that they were supposed to be so unpalatable that they would force officials in Washington to come up with a compromise.

"As we all know, the defense, and other, cuts in the sequester were designed to be a hammer, not a real policy," Mr. McDonnell wrote. "Unfortunately, inaction by you and Congress now leaves states and localities to adjust to the looming threat of this haphazard idea."

The looming cuts come just as many states feel they are turning the corner after the prolonged slump caused by the recession. Gov. Martin O'Malley of Maryland, a Democrat, said he was moving to increase the state's cash reserves and rainy day funds as a hedge against federal cuts.

"I'd rather be spending those dollars on things that improve our business climate, that accelerate our recovery, that get more people back to work, or on needed infrastructure - transportation, roads, bridges and the like," he said, adding that Maryland has eliminated 5,600 positions in recent years and that its government was smaller, on a per capita basis, than it had been in four decades. "But I can't do that. I can't responsibly do that as long as I have this hara-kiri Congress threatening to drive a long knife through our recovery."

Federal spending on salaries, wages and procurement makes up close to 20 percent of the economies of Maryland and Virginia, according to an analysis by the Pew Center on the States.

But states are in a delicate position. While they fear the impact of the automatic cuts, they also fear that any deal to avert them might be even worse for their bottom lines. That is because many of the planned cuts would go to military spending and not just domestic programs, and some of the most important federal programs for states, including Medicaid and federal highway funds, would be exempt from the cuts.

States will see a reduction of $5.8 billion this year in the federal grant programs subject to the automatic cuts, according to an analysis by Federal Funds Information for States, a group created by the National Governors Association and the National Conference of State Legislatures that tracks the impact of federal actions on states. California, New York and Texas stand to lose the most money from the automatic cuts, and Puerto Rico, which is already facing serious fiscal distress, is threatened with the loss of more than $126 million in federal grant money, the analysis found.

Even with the automatic cuts, the analysis found, states are still expected to get more federal aid over all this year than they did last year, because of growth in some of the biggest programs that are exempt from the cuts, including Medicaid.

But the cuts still pose a real risk to states, officials said. State budget officials from around the country held a conference call last week to discuss the threatened cuts. "In almost every case the folks at the state level, the budget offices, are pretty much telling the agencies and departments that they're not going to backfill - they're not going to make up for the budget cuts," said Scott D. Pattison, the executive director of the National Association of State Budget Officers, which arranged the call. "They don't have enough state funds to make up for federal cuts."

The cuts would not hit all states equally, the Pew Center on the States found. While the federal grants subject to the cuts make up more than 10 percent of South Dakota's revenue, it found, they make up less than 5 percent of Delaware's revenue.

Many state officials find themselves frustrated year after year by the uncertainty of what they can expect from Washington, which provides states with roughly a third of their revenues. There were threats of cuts when Congress balked at raising the debt limit in 2011, when a so-called super-committee tried and failed to reach a budget deal, and late last year when the nation faced the "fiscal cliff."

John E. Nixon, the director of Michigan's budget office, said that all the uncertainty made the state's planning more difficult. "If it's going to happen," he said, "at some point we need to rip off the Band-Aid." your social media marketing partner


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+20 # Todd Williams 2013-02-23 11:00
Oh now the whining anf gnashing of teeth will start and will be heard all over the South. As has been pointed out in numerous articles, the GOP-controlled states, for the most part, are the poorest, most needy states in the Union; ones that take the most Federal dollars for dollars they pay in taxes. Of course the rich folks in these states will continue to reap rewards at the expense of many of their citizens. Meanwhile, all lower income people in these states will take the big hit, including angry white males who trip over their own feet flocking to the polls to vote for the latest Tea Party favorite.
+20 # grouchy 2013-02-23 11:10
Ironically here, the Southern states get the most Federal aid--and are also heavily oriented to Tea Party political orientation. Sort of like shooting themselves in the foot! Wonder what they will be thinking when the gravy tap gets closed off!
+7 # wwway 2013-02-23 12:55
It's amusing as well as ironic, isn't it? Southerners are hung up on the culture war and don't pay attention to anything else. I use the metaphor "Chickens for Col. Sanders" to describe those who vote against their own best interest.
+10 # tswhiskers 2013-02-23 11:23
It seems to me that Rep. governors could say a few words to their Rep. state reps. and senators about acting like the adults they should be and call off the sequester. Obama is not the problem and if they are honest, Rep. state officials know it. But apparently they find it far easier to write letters to the president than to try talking sense to Congress. The Reps. in Congress got us all into this mess and rather than lie about who got us here they should be adults and do their jobs for the country instead behaving like children who can't get their way and pouting about it. Dems, don't give to them. That will just make them harder than ever to deal with. The Dems have given in to Reps. far too often in the past. It just makes them more stubborn, knowing that if they hold out, they will always get their way.
+10 # Nominae 2013-02-23 18:26
Quoting tswhiskers:
It seems to me that Rep. governors could say a few words to their Rep. state reps. and senators about acting like the adults they should be and call off the sequester. Obama is not the problem and if they are honest, Rep. state officials know it........

I think that the point being overlooked across the Nation is the fact that ALL of this "fiscal" crap is simply a MANUFACTURED CRISIS. This country is NOT "out of money". This country is NOT "going broke" such that Grandma needs to be eating a *much* cheaper brand of cat food.

These manufactured fiscal shenanigans are DESIGNED to destroy the Federal Government. To "PROVE" that "Government Doesn't Work" to the point that the citizenry will BEG for Corporate Privatization of EVERYTHING. As noted in this article, if the Federal government is undermined, the States will quickly collapse on their own.

Bush & FEMA ? Bush and Katrina ? Robbing and looting of the U.S.Treasury by BOTH corporate-owned parties ? All part of the same strategy.

Not to mention the fact that robbing the citizenry of both homes and bank savings makes the masses SO much easier to control. NDAA did NOT pass in a "vacuum". Most people are now so busy trying to go from paycheck to paycheck that they don't have the luxury of informing themselves relative to these scams, and then taking time off from their three jobs substandard jobs to go protest these scams.

For the wealthy, everything is right on schedule.
+1 # Depressionborn 2013-02-25 19:48
Yes, the wealthy will likely survive. That's probably why they're wealthy.

Last month, the Senate Budget Committee reported in fiscal year 2011, between food stamps, housing support, child care, Medicaid and other benefits, the average U.S. household below the poverty line received $168.00 a day in benefits. The median household income in America is just over $50,000, which averages out to $137.13 a day.

Being on welfare now pays the equivalent of $30.00 an hour for a 40-hour week, while the average job pays $25.00 an hour. Apparently you are right and we are not out out of money, we are simply out of work. Except why work anymore?

(It is obviously all Bush's fault.)
+3 # Todd Williams 2013-02-23 11:42
I think Obama is going to win this match, hands down. Try as they will, the GOP just can't seem to pin this debacle on the President. What these GOP House members will soon find out is that in their penchant for budget slashing, they may have just cut off their own feet.

Already, some GOP governors are lined up with their hands out for more Medicare money. These governors think that by taking the free Federal money, their pooer constituents will vote for them at the next election. That will remain to be seen. Whatever, the politics, it's a good thing that these governors have agreed to expand Medicare programs. The bottom line is that people's lives will be saved.
+1 # tbcrawford 2013-02-23 12:14
Let's hope Congress can quickly pass an immigration bill, urgently needed in California. Also tragic for California's economy was Eric Holder's decision to criminalize medical marijuana, a source of regulation and tax income so important to human health and our economy! And a financial transaction tax is such a blatantly obvious source of revenues I wonder who really is running the e Chinese or North Koreans?
+6 # wwway 2013-02-23 12:50
While I think God every day that Republicans aren't in power, I disagree with Holder's decision and still hold to the belief that the bankers aren't going to be prosecuted because of their lobby and medical marijuana will continue to be criminalized because of the prison lobby. The War on Drugs is easier to execute than brining deeply connected bankers to trial.
+6 # Nominae 2013-02-23 19:03
Quoting wwway:
..... I disagree with Holder's decision and still hold to the belief that the bankers aren't going to be prosecuted because of their lobby and medical marijuana will continue to be criminalized because of the prison lobby......

When British banks are being *caught* money laundering over $800 *Billion* dollars for no-kidding *killer* drug cartels, and receive not so much as a slap on the wrist, we see the proof that "the fix" is in. And this is just the illegal money laundering that the banks were *caught* being involved in up to their eyebrows.

wwway has it. Do we *really* think that bankers are going to give up THIS kind of income ? The Federal Government likewise has no shortage of clandestine units under the Justice Department, CIA, etc., whose entire *funding* is financed by the illegal drug trade.

The mistake here is for the public to believe that keeping drugs illegal ONLY benefits the Illegal Drug Dealers !

It's a leap to the mind-numbing realization that the Govt. and the Corporations (Banks, just to name ONE ) are making a literal KILLING on illegal drugs !

As wwway points out above, how do people think we could continue to support the the lobbyists from the For-Profit Prison Complex *without* keeping chickensh*t little illegal marijuana laws on the books?

Because, good golly, we don't expect these for-profit prison people to start dealing day-to-day with the dangers of stone-cold REAL LIVE CRIMINALS do we ?
+2 # Depressionborn 2013-02-23 12:23
No state has the right to take from another.
+3 # Todd Williams 2013-02-23 13:25
Under the principals of nullification and states' rights, your statement would be true. But our country does not operate on these out-moded concepts. We are a Union, remember? This issue was decidend by the Civil War and does not have to be fought over again. As much as some liberals and conservatives hate it, we should help to all poor people, regardless of race. Even though "Buba" from Mississsippi hates blacks and Latinos and voted for Romney, he still deserves our collective help with food stamps, section 8 housing and the like. All Americans
+1 # Depressionborn 2013-02-23 19:50
Yes, Mr. Williams,
what you say is surely so. Yet things that are legal are not necessarily always right. Slavery was not right.

The Bible tells us charity is the great virtue so you are also right about that. But no one has the "right' to take from another. Force is not charitable. You are wrong to think so.
+4 # Citizen Mike 2013-02-23 16:32
Well, now, all those folks who have been fooled into calling for "less government" will get a taste of just what that would be like. A half-year under sequester conditions will be for the best; to wake 'em up to the reality of the need not for small government but for good, effective government which serves the public's genuine needs. They will howl with pain and lean on their elected representatives to accept a reasonable compromise that calls for less austerity.
-1 # Depressionborn 2013-02-23 17:29
"Air traffic controllers and airport security will see cutbacks, which means more delays at airports across the country," Obama continued. "Thousands of teachers and educators will be laid off. Tens of thousands of parents will have to scramble to find child care for their kids. Hundreds of thousands of Americans will lose access to primary care and preventive care like flu vaccinations and cancer screenings."

How much is to be "cut"? $85 billion on a budget of $3.6 trillion. That's 2.4%. As of August household income was down 8.2% under Obama and the country had to make do. Now Obama tries to tell us that government can't do with 2.4% less? Seriously?

He has been lying about the sequester since the debates. The sequester was Obama's team's idea:
-3 # frankdavid 2013-02-23 18:45
+1 # Depressionborn 2013-02-23 21:17
Quoting frankdavid:

OK, I read the salon thing.

It was meaningless dribble. Obama is on record that he would veto anything less than sequestration.

Those who get their info from Salon don't know much.
+2 # Texas Girl 2013-02-23 19:05
Finally, there's a comment from someone whose looking at the numbers and applying some common wisdom. And remember, Obama was all for the sequester -- before he was against it. No integrity demonstrated there.
0 # Depressionborn 2013-02-27 18:22
Thanks Texas

Menckin had it right I think.

H. L. Mencken correctly observed:

Government is actually the worst failure of civilized man. There has never been a really good one, and even those that are most tolerable are arbitrary, cruel, grasping and unintelligent.

Mencken also was prescient:

As democracy is perfected, the office represents, more and more closely, the inner soul of the people. We move toward a lofty ideal. On some great and glorious day the plain folks of the land will reach their hearts desire at last, and the White House will be adorned by a downright moron.
+1 # Depressionborn 2013-02-28 00:37
We are not supposed to vote for our own best interest. It is supposed to be for God and Country when we vote. The problem is not Dems or Repubs, the problem is us.

Once we named our carriers Lexington and Enterprise, now we name them for presidents. That really says it all. You have to think about it for a while. We can't even put together a rational budget.

It's not going to work forever. We will have to get ourselves out of the mess. There is no one else. When you are in a hole, you ought to stop digging.

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