Government SPLOST 7 | | | Editor

Analysis: States see danger in federal budget cuts

Monday, Sept. 17, 2012 7:04 AM
Last updated 7:51 PM
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ATLANTA -- Members of Congress used their August recess to visit constituents and warn them about the consequences of the so-called fiscal cliff in the road up ahead.

Depending on their politics, they either warned of spending cuts, as much as 10 percent to domestic and defense spending, or they bemoaned the ending of tax cuts in place since then-President George W. Bush sponsored a decade ago as tonic for a tamer recession than the one that we’re still suffering from.

Economists, including the nonpartisan Congressional Budget Office, warn that the combination of tax hikes and spending cuts will rob the economy of a couple of percentage points of performance. When the economy is only growing at a couple of percentage points to begin with, that translates into another recession.

Recession-weary Americans shudder at the thought of a new, national economic setback.

What hasn’t gotten as much attention is the impact the episode could have on state and local government.

Most of the domestic-spending cuts will fall in programs that state and local governments administer for Washington, from Head Start to AIDs screening, sometimes mixed with state or local money. Head Start’s cuts, for example, amount to $15.5 million, as well as $39 million on the bubble in Title I reading grants and $1.3 million in Job Corps funding, just to name three.

The fiscal cliff is set to trigger Jan. 1. That would come in the middle of fiscal years for state and local governments.

If Congress concocts some type of temporary fix, as most observers expect, that is likely to happen either right after the November election or after the start of the new year.

Either way still complicates budgeting for other levels of government.

A smaller issue once hung up consideration of Georgia’s budget in 2007 as lawmakers waited for Congress to decide how much it would fund the federal share of PeachCare for Kids. Waiting on the numbers to complete that one area of the budget held the General Assembly in limbo for weeks.

Imagine if legislators are waiting for Congress to reach decisions on dozens of spending programs. The legislature would grind to a halt.

There’s no provision for leaving a blank on the budget or penciling in a figure that could be corrected later after Congress votes. It has to be exact, and it has to balance.

If the state merely passed a budget with the assumption that the fiscal-cliff cuts will occur, and then Congress restores all or part of the money, state agencies wouldn’t be able to spend it without a special legislative session to authorize it.

Gov. Nathan Deal is already making assumptions now about what Congress will do after the election. Every state agency has submitted spending proposals to him so he can cobble together a statewide plan in time for the mid December deadline with the printer. (It’s a big document.)

If the governor guesses wrong -- and how can anyone predict with any certainty -- then the whole document requires revision. After all, many of these federal programs in the balance demand the state pony up, and how can Deal know how much if he doesn’t know the amount the state can expect in the federal share?

Lawmakers, lobbyists and their staffs should clear a wide swath in their Day Books. Forget about joining the kids for a spring break vacation.

During the 2007 session, legislative leaders tossed in some unscheduled days off to keep the official time from expiring. On some days, lawmakers went home. On others, they met in committees to review bills without advancing the legislative calendar.

As frustrating as the wait seemed at the time, the extra days for committees to ponder bills resulted in better-written, legislation with fewer unintended results, according to most observers.

School boards and county commissions are also going to be in limbo until federal sequestration is an accomplished fact or no longer a possibility. Those bodies don’t draft their budgets in January, but they’ll have to be prepared to react to whatever happens.

Conservative Republicans in Congress sought the immediate spending cuts that sequestration triggers in the form of a sudden cliff of sorts. They were tired of budget deals in past years in which tax increases took effect immediately and spending reductions were to be phased in over some future date that never comes.

They got their wish.

While the sudden cuts may be beneficial for the country in the long run, the jolt -- and the suspense -- may not be pleasant for state and local officials in the near term.

At least it could result in better legislation for the non-financial bills.

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Little Lamb
Little Lamb 09/17/12 - 10:42 am

Walter Jones wrote:

Imagine if legislators are waiting for Congress to reach decisions on dozens of spending programs. The legislature would grind to a halt.

Go ahead, make my day. The legislature grinding to a halt would be a blessing to us Georgians.

Actually, if the senators and representatives had any sense, they could respond creatively to a federal government delay in deciding how much of our federal tax money they are going to return to the states — the General Assembly could simply postpone the start date until after the federal government acts. Then they would have the same amount of time to craft the budget that they do now.

By the way, how come the Georgia General Assembly can get their annual business done in three months, while it takes South Carolina six or seven months?

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