 |
| Source:Center For Budget & Policy Priorities- with a look at the Federal deficit. |
"If it fails to include significant new revenues, a major legislative package to shrink federal deficits would almost certainly make substantial cuts in federal funds that support states and localities. These cuts likely would force states and localities to reduce the quality and reach of their basic public systems — schools, clean water facilities, and law enforcement activities, for example — or to raise new revenue or cut other programs to continue meeting these needs. Either way, the result would be a large cost shift from the federal government to states and localities. By contrast, if Congress adopts a balanced deficit-reduction plan that includes significant new revenues, the resulting cost shift to states and localities almost certainly will be smaller.
States Provide Services That Are National Priorities
States and localities provide public services that address national priorities. For example, they educate the nation’s children and build and repair the nation’s roads, bridges, airports, and public transit systems. They also undertake a wide range of other important functions, including protecting waterways from sewage contamination, protecting public safety, reducing homelessness, revitalizing run-down neighborhoods, providing technical job skills training to community college students and others, and responding after disasters. Some 87 percent of the nation’s public employees — teachers, police officers, child abuse case workers, road construction engineers, and many others — work for state or local governments.
States, Weakened by the Recession, Cannot Absorb Large New Cost Shifts
State revenues for these services were deeply damaged by the recent recession, the worst for state finances in 70 years. Since the recession hit, states have closed budget shortfalls totaling well over half a trillion dollars. In the last four years, states and localities have shed more than 600,000 jobs. While state revenues are beginning to recover, they remain about 6 percent below pre-recession levels after adjusting for inflation. It will be several years more before states recover fully.
With their own budgets so seriously damaged, states cannot absorb massive new cost shifts from the federal government. Significant federal funding cuts would force states to lay off still more people and to cut spending for schools, roads, or other public services in others ways or else raise substantial new revenue in-state to continue addressing these needs. Either way, the result would be a large cost shift from the federal government to states and localities, a cost shift that would hit states hard at a time when their budgets already are deeply wounded.
Federal Deficit Reduction That Does Not Include Significant Revenue Likely Would Shift Substantial Costs to States
Many federal policy makers agree in broad terms that, as they seek to reduce the deficit, cuts in Social Security and Medicare that affect current beneficiaries should be limited and defense spending should not be cut much, if at all, below the spending caps imposed by the 2011 Budget Control Act. If the savings from Social Security, Medicare, and defense — which together account for well over half of non-interest federal spending — are limited and the deficit plan does not include significant revenues, federal support for programs operated by state and local governments will stand out as one of the few remaining sources of large potential savings.
That’s because a large part of the federal budget outside of Social Security, Medicare, defense, and interest payments on the national debt — 41 percent of what’s left — consists of grants to states and localities. Hence, if significant new revenue isn’t included, a major legislative package to shrink federal deficits almost certainly will cut deeply into state and local aid, shifting to the states more of the costs for educating children and providing other public services."
From CBPP
No comments:
Post a Comment