Senior Director of State Fiscal Research
As we explain in a new analysis, a deficit-reduction plan that lacks significant revenues would almost certainly deeply cut federal funds that support states and localities as they educate children, build roads and bridges, protect public health, and provide law enforcement.
Policymakers generally agree that we need a substantial deficit-reduction package to keep the national debt from growing faster than the economy. They also agree broadly that cuts in Social Security and Medicare that affect current beneficiaries should be limited and that defense spending should not be cut below the spending caps imposed by last summer’s Budget Control Act (BCA). Those choices would leave federal support for states and localities as one of the few remaining potential sources of large savings.
The House-passed budget from Budget Committee Chairman Paul Ryan is an example of the sort of approach Congress likely would take if it rejects a balanced approach to deficit reduction that includes significant revenues. Consider some of the effects such a plan could have on state and local funding:
If funding for these grants to state and local governments is cut by 22 percent, in line with the cut to overall non-defense discretionary funding, states and localities would lose about $28 billion in 2014. (This does not include additional cuts the Ryan budget would make to transportation funding.)
Cuts of this magnitude would force states and localities to reduce the quality and reach of their basic public systems or to raise new revenue or cut other programs to continue meeting these needs. Either way, the result would be a huge cost shift from the federal government to states and localities. By contrast, a balanced deficit-reduction plan that includes significant new revenues almost certainly would lessen the resulting cost shift to states and localities.
Click here to read the full paper, which includes state-by-state estimates of the size of these cuts.