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States brace for new round of cuts

WASHINGTON – States have been forced to gear up for a potential second round of across-the-board federal spending cuts after Congress left for its summer recess without a budget deal.

Another round of sequestration would reduce federal spending on everything from Meals on Wheels to Head Start, leaving states with approximately $4.2 billion less in federal dollars for the 2014 fiscal year starting Oct. 1, according to Federal Funds Information for States.

FFIS is a Washington group that helps states manage their federal money.

On average, the federal budget accounts for about 30 percent of state revenues, making it the largest single source of money for many states. About 90 percent of the federal dollars come in the form of grants. About three-quarters of that money would be subject to sequestration, according to an FFIS report.

Preliminary estimates by FFIS are that, if Congress fails to pass appropriations bills and the government is run on the same budget levels as the year before, states will face about $4.2 billion in federal funding cuts.

Some of the areas to be cut include public housing assistance, money for schools with low-income students, food inspection, scientific research grants and environmental protection programs.

The total amount of the fiscal year 2014 cuts would be less than the $4.6 billion reduction states experienced in fiscal year 2013. However, this round may be more painful because it comes on top of the earlier cuts. Many states say there’s not much left to trim.

“Remember, states already have their fiscal year 2014 budgets in place, so almost anything that happens is likely to upend their spending plans in some way, shape or form,” said Marcia Howard, executive director of FFIS.

Congress went on its summer recess earlier this month with the budget situation unresolved. The House and Senate were unable to pass spending bills that would either conform to across-the-board sequester cuts or at higher numbers set by the 2011 Budget Control Act.

The two chambers can’t even agree on what the total spending amount for fiscal 2014 should be. The House uses $967 billion while the Senate budget allots $1.058 trillion.

If the impasse is not settled by Oct. 1, the start of the fiscal year, the federal government could shut down, adding to the fiscal bedlam.

Without a budget, Congress might have to pass a so-called “continuing resolution,” funding the government at last year’s levels, that would allow the sequester cuts to take effect.

Federal government officials acknowledge that states are having a difficult time navigating the uncertain budgetary waters. “They (states and localities) have a further level of uncertainty,” White House budget director Sylvia Mathews Burwell told a Wall Street Journal breakfast roundtable this month. “Especially because much of their money is in the (federal) grant space.” Uncertainty “is one of the most damaging things we have right now,” she said.

Michael Leachman, director of state fiscal research for the progressive Center on Budget and Policy Priorities, said if the sequestration ax falls again, most state legislatures would come back into session early next year facing shortfalls.

“They are already in a difficult spot because they already have imposed major cuts to their schools and other public services,” Leachman said. “If they enter those legislative sessions having to deal with additional cuts in federal funding for schools or law enforcement or clean water or programs that help low-income families, that makes their job even more difficult.”



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