Without new revenue, federal deficit reduction efforts will lead to devastating cuts in federal support for education, transportation, law enforcement, the social safety net, and other state and local programs, according to a new report from the Center on Budget and Policy Priorities. Oklahoma faces a loss of $345 million in discretionary state and local aid in 2014 alone, and over $3 billion from 2013-2021 under the House-approved budget plan developed by Congressman Paul Ryan, which illustrates the kind of approach Congress likely would take if it rejects significant new revenues. Cuts of this magnitude would lead to a significant reduction in the quality and reach of core public services in Oklahoma and would threaten the state’s economic recovery.
Under the Ryan plan, federal support for discretionary non-defense spending would be slashed by over 20 percent compared to 2012 levels, according to the Center’s estimates. That part of the federal budget funds grants to state and local governments to support services that states and localities provide, such as education, law enforcement, water treatment facilities, and disaster response.
The cuts in the Ryan plan would be three times deeper than under the automatic cuts scheduled to take effect beginning in 2013 under the ‘sequestration’ process set in place during last year’s debt ceiling agreement. By 2021, federal grant programs for state, counties, and cities likely would be less than half the average of the last 35 years.
Federal aid for states is extremely vulnerable if Congress sets large deficit reduction goals while avoiding any revenue measures and sparing Social Security, Medicare and defense from substantial cuts:
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.
The discretionary non-defense budget includes dozens of federal program that support key functions of state and local government. Among the areas facing cuts in federal spending exceeding 20 percent under the Ryan budget would be:
- Education – Funding for schools in high-poverty areas (Title I), special education, Head Start, adult and vocational education, training and employment services;
- Transportation – Road and bridge planning, construction and rehabilitation, public transit, and airports;
- Health and Social Services – Nutrition services (WIC), mental health and substance abuse services, community health centers, child care subsidies, home heating and cooling assistance, and rental assistance;
- Public Safety and Disaster Response – Federal disaster relief, Justice Assistance Grants, funding for state and local police officers.
In addition to slashing discretionary programs, the Ryan budget would cut federal funding for the Medicaid program by 34 percent by 2022 relative to what Medicaid funding would be under current law, leaving states with greater responsibility to support the health care costs of low-income residents.
The threat of significantly reduced federal support comes at a time when Oklahoma, like other states, has yet to fully recover from years of budget cuts which have battered schools, public health departments, law enforcement agencies, correctional facilities, and others core public services. Large cuts in federal aid will further compound the states’ structural budget deficits by widening the gap between the cost of services and the revenues available to pay for them.
This new report presents a stark picture of the enormous stakes for states and local governments in the federal budget and tax negotiations that will follow November’s election. State policymakers and advocates must make clear to our federal representatives that a balanced approach to deficit reduction that includes new revenues and limits cuts to discretionary non-defense programs is essential to Oklahoma’s continued prosperity.