Severe Budget Cuts Ahead

With stimulus funding gone, a misinformed citizenry is unprepared for the funding cuts on the horizon.
by | September 2011

In considering the role and size of government at all levels, I’ve thought for some time that the country could use a healthy dose of reality therapy. Now, I’m afraid my wish is coming true.

Even as the collapse in state revenues finally seems to have reversed, the full brunt of the Great Recession is washing over most states and localities like a tsunami, carrying away programs and people on a scale that was unimaginable a short time ago.

As the harsh reality of our situation intensifies, I hope it is educational for voters. I want them to think about the woman with the bumper stickers wrapped around her head at a Tea Party demonstration a while back who carried a poster reading, “Keep Government’s Hands Off My Medicare!” Or the folks polled late last year who thought, on average, that 27 percent of the federal budget went to foreign aid. (In fact, it’s less than 1 percent, which places the U.S. in last place among developed nations in such spending as a portion of their economies.) I could go on, because the level of misinformation, exaggeration and outright deceit -- amplified in the media and blogosphere fog -- is so widespread, it’s depressing.

As administration and congressional leaders began their endless discussions on the role of government early this summer, a scan of recent polling about what people really wanted from government was revealing. Basically they were saying this: Do not change Medicare, Social Security or even Medicaid (only 29 percent of self-described conservatives favored cuts). The margin was closer on cutting defense, with 44 percent favoring and 54 percent against, though 63 percent of college graduates supported reductions. By almost a two-to-one margin, respondents favored taxing higher income earners, but opposed increases for the middle class, which they think is paying an increasing amount at the federal level. In fact, taxation levels are about where they were a half century ago.

As this year’s state budgets have worked their way through legislatures, reality is setting in. Education from pre-school to grad school is being eviscerated. Nearly two-thirds of the school districts in the country have or will be laying off some 250,000 teachers and staff. State funding of university systems already had fallen to 60 percent of their revenues before this latest round of cuts. Some of the nation’s flagship campuses now rely on state governments for about 20 percent of their revenues. Meanwhile, tuitions are skyrocketing by as much as 20 percent a year; in Florida there have been three consecutive 15 percent increases because state law prohibits exceeding that number. The increases in California are similar.

In all, there have been 535,000 layoffs of public-sector workers between August 2008 and last May. Before this is over, that number may soar to 800,000 -- about 80 percent of them from local government. The pink slips are not only for teachers, but also public safety employees, social workers and others. Nothing or no one is immune. Cuts are hurting state parks, mental health programs, child-care subsidies for welfare-to-work mothers, day-care centers for the elderly and even the judiciary.

No one thinks much about courts and judges, yet the vast majority of civil and criminal cases in the country, 40 million of them annually, run through state court systems. Since they are largely invisible to the public, it’s easy to starve them. New York’s judges have not had a salary increase in 12 years. Judges in Massachusetts, reacting to the latest cuts in the judicial budget, are urging the governor not to nominate any more judges because they can’t pay them. Instead, they plan to close 11 courthouses and lay off staff.

It’s a perverse paradox that just as state revenues are reviving, years of budget cuts are catching up. One of the reasons is fading stimulus money, particularly for Medicaid, where $103 billion disappeared as of June 30; the same has happened to $48 billion for education. Even before the stimulus, federal funds accounted for almost 30 percent of state revenues, the largest portion of the pie.

Now, we have the anti-stimulus. Looming cuts in federal grant programs to states and localities will hit critical areas like infrastructure and transportation, but also economic development, medical training and research, and even Medicaid -- the largest federal grant to the states, which was supposed to expand significantly in coming years under the new national health-care law.

Medicaid is definitely “on the chopping block,” according to Sen. John D. Rockefeller of West Virginia, chairman of the Senate Subcommitte on Health Care. “Seniors vote. But if you are poor and disabled, you might not vote, and if you are a child, you do not vote -- that’s a lot of Medicaid’s population. They don’t have money to do lobbying.”

So I guess we may shrink Medicaid before we enlarge it.

As an old friend of mine, who used to represent his country’s treasury department at the British embassy in Washington, D.C., and knows the U.S. very well, loved to exclaim, “Hey, you guys are Americans! You can have it all.”

“Yes, we can,” was the president’s slogan during his campaign. But the reality, both for public leaders and an often misinformed citizenry, is that we cannot.

Peter Harkness
Peter Harkness  |  Founder, Publisher Emeritus
pharkness@governing.com

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