6 State and Local Questions About Sequestration

BY:  | February 28, 2013 

The March 1 sequestration deadline has arrived and while the administration has said it will wait until late Friday to approve the law, Washington is settling in for lean times. Congress is leaving town and President Barack Obama said on Friday that he plans to sign the $1.2 trillion in spending cuts into law when it arrives on his desk. Of course, lawmakers could certainly find a compromise later in the month to avoid the cuts over the next decade.

When asked Friday why he couldn’t force lawmakers into a deal, Obama replied, “I’m not a dictator, I’m the president,” and if Congressional leaders “say we need to catch a plane, I can’t block the doorway.”

He added that the notion “floating around Washington” that “I should somehow do a Jedi mind-meld with these folks and convince them to do what’s right” is misguided.

So what do states and municipalities need to know about the months ahead? While no one can say with certainty what sequestration will look like, that hasn’t stopped people from making their predictions:

What is the overall impact to state programs?

Let’s put it this way: States have certainly suffered through worse. About 82 percent of federal funding that’s most important to states — including Medicaid and the Children’s Health Insurance Program — is actually exempt from the automatic cuts, according to Federal Funds Information for States.

But Governing’s Ryan Holeywell reported last week that governors are still fearful of the impact to other key programs like Head Start; the Women, Infants and Children program, which provides nutritional assistance to poor families; the Low Income Home Energy Assistance Program, which helps the poor pay for heating and cooling; programs that address substance abuse prevention; and various workforce and vocational training efforts.

In fact, states and municipalities may already be fairly well prepared to handle the effects of sequestration, thanks to cutbacks and other austerity measures they’ve already made in response to a weaker revenue environment. Standard & Poor’s Ratings Services said in a report Thursday that sequestration  “may have only minor negative credit consequences for state and local governments and their affiliated entities.”

“States and many local governments have been actively monitoring developments at the federal level, and we believe they have evaluated the potential effects of sequestration in their revenue forecasts and budgets,” Standard & Poor’s credit analyst Gabriel Petek said Thursday in a statement.

How will public health programs be affected?

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