Minnesota stands to lose millions under federal deficit-reduction plan

If federal policymakers fail to put forward a balanced deficit-reduction plan that includes significant revenues, Minnesota’s schools, roads and bridges, and communities would be substantially harmed, with serious implications for the state’s economy.

New analysis by the Center on Budget and Policy Priorities finds that Minnesota would lose an estimated $420 million in federal funding for education, law enforcement, clean water, and other state and local priorities in 2014 under the House-passed Ryan budget, which illustrates what a deficit-reduction plan that doesn’t include revenues would look like. The total impact from 2013 to 2021 would be a loss of $3.8 billion in federal funding to Minnesota and local communities.

Federal policymakers agreed to a deficit-reduction plan last year called the Budget Control Act. But there’s likely more to come. As the paper explains:

Leading federal policymakers generally agree that to keep the national debt from growing faster than the economy, the deficit must be reduced by at least $3 trillion over the next 10 years, in addition to the roughly $1 trillion in savings from complying with the spending caps imposed by last summer’s Budget Control Act (BCA).

There is also general agreement among these leaders to limit cuts to Social Security and Medicare for current beneficiaries and not to cut defense further than under the BCA. In this context, without revenue increases as a meaningful part of deficit reduction, federal funding for state and local governments will take a major hit.

The Ryan budget passed by the U.S. House gives an idea of what kinds of cuts could happen if revenues are not part of the package. The Ryan budget likely would reduce federal funding for health care in Minnesota, since it would cut Medicaid by 34 percent by 2022.

In addition, the Ryan budget would reduce what’s called “discretionary funding” for states and localities by an estimated 22 percent, and make cuts to transportation and transit. The consequences would be severe and widespread:

  • Education. Head Start, teacher quality programs, special education and schools in high-poverty areas likely would face deep cuts.
  • Transportation. Likely cuts would hurt Minnesota’s ability to build and repair roads, bridges, airports and public transportation systems.
  • Public safety and disaster response. Minnesota would likely have less funding for disaster assistance and grants that help local police departments hire, train and equip officers.
  • Community development. Funds that help improve water and sewer systems and revitalize our neighborhoods likely would face cuts.
  • Housing. It’s likely that Minnesota would be less able to provide rental assistance and heating assistance for low-income people, many of them elderly.
  • Workforce. Minnesota would have fewer resources for workforce training and placement services and child care assistance for low-income working parents.
  • Health. Funding cuts would hinder Minnesota’s ability to keep community health centers open, provide mental health and substance abuse services, and support nutrition among low-income mothers and young children.

These cuts would be on top what will already occur under the spending caps in the Budget Control Act. By 2021, under the Ryan budget, federal grant funding for states, counties and cities would reach historic lows, and be less than half of the historical average.

Additionally, the funding cuts to states, counties and cities under the Ryan budget proposal would far exceed the automatic cuts scheduled to begin in January, often referred to as sequestration. In 2014, the Ryan budget cuts would be three times as deep, inflicting far more damage than sequestration. In later years, as the sequestration cuts diminish but the Ryan cuts remain as deep, the difference would be even larger.

It’s critical that Minnesota’s members of Congress support a responsible and balanced approach to long-term deficit reduction that includes increases in revenue. This approach recognizes that tax cuts have been a significant contributor to the growth in the federal deficit. A balanced approach is crucial so that deficit reduction does not lead to a substantial increase in poverty and inequality and reduce our investment in the building blocks of our future prosperity, such as education, transportation, and safe and vibrant communities.

You can also read our press release.

-Nan Madden

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About Nan Madden

Nan Madden is director of the Minnesota Budget Project.
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