States Brace for Cuts in Federal Aid

This post was originally published on the Public Notice: Bankrupting America Blog.

With uncertainty surrounding spending cuts in the debt ceiling deal, lawmakers in states and municipalities are bracing for potentially weaker streams of federal cash.

And the amount at stake is sizable, with states set to receive $586 billion from the federal government this year, and four – Arkansas, Illinois, Missouri, and North Carolina – depending on that cash for more than 40 percent of their spending. Eighteen others use federal aid for more than 30 percent of their budget.

Of course, there are some that are worried what significant cuts in federal aid will mean.

But as Tallahassee Mayor John R. Marks III notes, cities will “feel some pain as we go forward,” but “we must do these kinds of things to get the deficit under control.”

That view is shared by Robert Ward, Deputy Director of the Rockefeller Institute of Government, who suggested that “it’s hard to argue that the status quo could simply continue forever” and that the impact would not have been more severe without a deal.

Moving forward, Delaware Gov. Jack Markell is relieved “now that the [debt ceiling] bullet has been dodged,” and reflects that “we’ve got to work just as hard” to “understand the impact of this deal and where these cuts are coming from.”

There is no question that difficult cuts will be made that will impact the budgets of states from coast to coast. But as state and local lawmakers watch the decision-making drag on into the fall, there is no question that excessive state dependence on federal cash is unfeasible for our nation’s long term fiscal stability.