Looming budget cuts may cost Iowa $72.5M

Congress’ partisan bickering of late comes at a severe cost to everyday people.

Here in Iowa, their political posturing could add up to $72.5 million in cuts. That’s what is at stake in the looming budget showdown.

Looming budget cuts may cost Iowa $72.5M

 

Congress was unable to agree on targeted ways to reduce the deficit.

Oct 1, 2012 Des Moines Register: http://www.desmoinesregister.com/apps/pbcs.dll/article?AID=2012310010014

Today marks the beginning of a new federal fiscal year and Iowa’s state leaders are braced for a possible $72.5 million reduction in handouts from Uncle Sam.

On the chopping block are millions of dollars in programs used by hundreds of thousands of Iowans every year. Those programs include: a supplemental nutrition program for pregnant women and children under 5 that is better known as WIC; a child care program to assist Iowa’s lowest-income working families; and an energy assistance program for the poor.

Also taking huge hits would be other government efforts that benefit nearly all Iowans either directly or indirectly, including such things as meat inspections, air traffic control and spending on education.

The cuts stem from a bitter congressional feud over the federal debt limit. Because Democrats and Republicans can’t agree on how to cut the deficit, Congress failed to enact a 10-year, $1.2 trillion spending reduction goal. So, in its place is something known as sequestration — automatic procedures to lower the deficit through a combination of across-the-board spending reductions and other targets to restrain future spending.

Officially, the cuts are to take place in January. Iowa agency directors, politicians and advocates for the poor hope Congress takes action to curtail some of the consequences of the plan.

“I’m trying to be optimistic,” said Lana Ross of the Iowa Community Action Association, a statewide advocacy group for the poor that works alongside 18 member organizations. “Nobody wants this to happen. Republicans don’t. Democrats don’t. The president doesn’t. I have to believe in my optimistic way that when they come back after the election this will be addressed.”

Sen. Tom Harkin, D-Ia., said he hopes the issue can be addressed in the so-called lame-duck session of Congress after the November election.

But Harkin fears legislative gridlock will persist.

In July, he released a report that denounced ideas to shift more of the cuts onto nondefense discretionary spending, which includes education, job training, medical research and national parks. Those areas already absorbed significant reductions and, by 2021, are projected to account for 2.8 percent of the U.S. gross domestic product, the lowest level in more than 50 years, his report showed.

“Sequestration is a bad deal. It’s sort of a blind cut across the board,” said Harkin. “Good programs are cut as much as programs that may have outlived their purpose.”

Iowa officials, even prior to the sequestration, estimated that federal money to the state budget will shrink from $7.1 billion in fiscal 2011 to almost $6.2 billion in the state’s current fiscal year, according to estimates from the Iowa Department of Management.

Some states, including Utah, Vermont, Virginia, and Washington, have set aside money to help soften the blow if the cuts begin, according to the National Conference of State Legislatures. Iowa sits on a $1 billion surplus in cash and so-called “rainy-day” accounts, but the state has not taken such action.

So far, department officials have been told to watch the issue closely. The total cut facing Iowa in the federal fiscal year that begins today would be $72.5 million, according to the Federal Funds Information for States, a service of the National Governors Association and the National Conference of State Legislatures.

“We’ve got to be prepared for whatever happens,” said Dave Roederer, the director of the state’s management department. “But we’ve made it clear that whatever federal funds are reduced, they should not expect state funds to backfill. The cuts would be so severe that we do not have state money to back that up.”

The state’s education department would face some of the harshest consequences should the sequestration remain unchanged. About 70 percent of the department’s budget comes from federal money, noted Jeff Berger, the state’s deputy education director. Virtually every program in the department would face cuts, excluding school lunch programs, he said.

Berger predicted the cuts would ultimately lead to property tax increases of roughly $30 million a year because schools are mandated by the federal government to provide certain special education. If the federal government doesn’t provide the money, it must be generated elsewhere, he noted. The cuts would take effect for the 2013-14 school year.

“We think these cuts are misplaced — and are going to be, in the long term, ineffective — because there is no way these cuts are going to repair the deficit problem,” Berger said.

Sen. Chuck Grassley voted against the sequestration last year but said he doubts that the programs that Ross, Berger and others advocate for can escape without deep cuts. The reason, he said, is the nation’s fiscal health will continue to deteriorate if spending isn’t curtailed.

Grassley, like other Republicans, opposes allowing the so-called Bush tax cuts to expire at the end of this year because he said that would run counter to fostering a healthy economy. Allowing the expiration would bring nearly $1 trillion in revenue into the federal government’s coffers during the next 10 years, according to the Congressional Budget Office. President Barack Obama has said he supports extending the breaks for families that make less than $250,000 a year.

Grassley contends the deficit problem can be fixed only with significant reductions in federal spending. “It’s not because you’re undertaxed, it’s because Congress overspends that we have a problem,” Grassley said.

A number of programs are exempt from the reductions, including Medicaid and Social Security. But for those that aren’t exempt, it’s best to prepare for the worst, said Michael Bird of the National Conference of State Legislatures.

 

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