Harrisburg braces for cutoff of funds
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HARRISBURG -- Pennsylvania budget officials have told state agencies to prepare for steep losses in federal funding if Washington policymakers do not avert a set of automatic spending cuts scheduled to take effect in January.
The across-the-board spending reductions, known as sequestration, could cost Pennsylvania between 7 percent and 8 percent of its federal funding, according to Jay Pagni, spokesman for the state Office of the Budget. That could mean a loss of hundreds of millions of dollars in areas including special education, social services and economic development.
"The state has a mandate to produce a balanced budget," Mr. Pagni said. "If federal cuts happen through sequestration, through this fiscal cliff issue, Pennsylvania will not have the ability to backfill those federal dollars due to our lean budget."
The "fiscal cliff" has become a popular shorthand for the confluence of spending cuts -- intended to guarantee deficit reduction if policymakers fail to deliver a more nuanced plan -- and numerous tax increases, including expirations of the Bush-era rate reductions and the more recent payroll tax cut.
During a meeting of the National Governors Association last weekend in San Diego, Gov. Tom Corbett attended a session on how the spending cuts would affect states.
"The fiscal cliff is frightening," Mr. Corbett told a Harrisburg audience after his return. "To see what it means in terms of loss of revenue to the states ... in the hundreds of billions of dollars -- when I'm sitting with my budget people working on a budget and trying to figure out are we going to have it, are we not going to have it, what money's going to be there, what money isn't going to be there -- is absolutely frightening.
"Every one of us that were in that meeting, the governors and the governors-elect, came out of it with a very depressed feeling," he said.
Between the spending cuts and the tax increases, Mr. Corbett said the cliff makes him fear the country could enter a recession.
The state's main operating budget includes $27.65 billion in state money and $19.76 billion in federal money, according to budget documents prepared for House Democrats.
As negotiations continue in Washington, state budget officials are keeping an eye on the list of programs -- many of them aiding the poor -- that will be exempt from federal spending cuts.
"We just don't know yet what programs will be on the block or which ones will get a reprieve," Mr. Pagni said.
But administration officials have directed state agencies to consider the possible loss of federal money as they develop their budget proposals for the fiscal year starting next July. As the law stands, cuts in federal funding could be sustained by environmental protection and workforce development efforts as well as education and social services, Mr. Pagni said. Tens of millions of dollars could be lost to special education for students in kindergarten through high school, and tens of millions more for the Title I programs serving schools with high numbers of poor children.
Reductions in funding would take effect after Jan. 1, impacting programs in the state fiscal year that began six months earlier.
The Department of Public Welfare has been working with the governor's budget office to prepare for any impact from the spending cuts, said Carey Miller, an agency spokeswoman.
"At this point, we cannot estimate how much DPW will be affected by this, but we will remain committed to protecting our safety net of services while keeping within our budget appropriations," she said.
Legislative budget officials are also watching the news out of Washington. John O'Brien, a spokesman for Republicans on the House Appropriations Committee, said members are concerned about impacts on the upcoming budget.
"Right now, as far as what the specific implications are, we really don't know that," he said. "Next year as things become a little more clear and we start the budget negotiations, we'll have to work with the cards we're dealt."
Sen. Jake Corman, R-Centre and chairman of the Appropriations Committee, voiced a similar sentiment.
"We have to react to whatever they do," he said. "We're all sort of waiting anxiously to hear how they'll solve their budget problem."
Senate Democrats are particularly worried about how the cuts could affect medical assistance and special education, said Stacey Witalec, a caucus spokeswoman.
First Published November 23, 2012 12:00 am