Sequestration, Denton-style – Info on how it might impact our city
The March 1 deadline is upon us – the dreaded or welcomed sequester is now upon us, depending on your perspective, thanks to the collaborative spirit in Washington, DC nowadays. If you are like me, you are wondering what this means for Denton.
If you haven’t already, you might check out this helpful article published recently in the Denton Record-Chronicle on the subject.
It is important that the city’s main revenue sources are local: sales tax and property taxes. Most direct impacts from state or federal cuts come in the form of hits to particular programs instead of ongoing city operations. This is good in that the city is fairly insulated from big cuts at either of those two levels.
Below is an update from from a firm the city works with in DC to help us navigate the local impact of federal issues. I’m providing it here for your benefit and education…
Overall, sequestration will impose a 5.3 percent across-the-board cut on most FY 2013 non-Defense discretionary spending and a 7.3 percent across-the-board cut on most FY 2013 Defense spending. The final impact of sequestration remains unclear because, six months into the fiscal year, Congress has yet to finalize FY 2013 spending. Thus, the City does not yet know the funding levels for individual programs that it could use to calculate the impact of the sequester on FY 2013 grants to the City. For example, until the City knows its FY 2013 CDBG allocation, it cannot subtract 5.3 percent from it. (It is tough to subtract 5.3 percent from an unknown number!) Also, note that the impacts of FY 2013 sequestration will be felt gradually over time up to a year from now. For example, the City of Denton will probably not start spending FY 2013 CDBG funds until this time next year, or even later.
The across-the-board nature of the cuts means that the Administration will not have the discretion to prioritize some programs and spare others. For the City, sequestration would therefore impact most core local government programs, including but not limited to CDBG, HOME, local law enforcement assistance and Homeland Security grants. Those core local government grant programs have all seen significant cuts since FY 2010 and the sequester could add to the backlog of projects assisted by them. The sequester would also impact a number of programs that do not provide funds directly to the City but could have significant impacts on its citizens and the local economy. For example, the sequester would reduce funding for the Section 8 housing assistance program, which means fewer families would receive rental assistance from the Housing Authority, and for the Social Services Block Grant, which assists a number of Denton nonprofit organizations. For the school district, the sequester would mean a cut in core federal assistance (but not child nutrition programs). On the Defense side, the sequester could impact metropolitan area employers that provide equipment and services to the Pentagon. In addition, federal employees living in Denton, including those who work at FEMA Regional Headquarters, might be looking at furloughs and resulting loss of pay. (According to the Washington Post, the Defense Department will reportedly furlough all civilian employees one day per week for 22 weeks. Employees of other agencies may be similarly furloughed. Friends who work at Defense have confirmed this report.)
Federal subsidy payments for direct payment bonds are subject to sequestration. If the City issued any Build America Bonds, the 2013 federal subsidy for those bonds is subject to sequestration. For any Qualified Energy Conservation Bonds or issued by the City or DME after 2010, the 2013 federal subsidy is subject to sequestration. Similarly, if the school district issued any Qualified Academy Zone Bonds, the 2013 federal subsidy payment for those bonds is subject to sequestration.
Sequestration will not affect federal surface transportation programs funded from the Highway Trust Fund, which means that core formula funding for DCTA and for ongoing highway projects will not be affected. (However, sequestration will affect the New Starts Program, which funds new fixed guideway transit projects – no Denton impact but a regional impact, especially for DART.) Similarly, the Airport Improvement Program is also exempt from sequestration, which means sequestration will probably not affect any grants that the Airport receives from that program. (However, sequestration could affect tower operations at the Airport.) In addition, most low-income health care, nutrition and income support programs (Medicaid, SNAP, child nutrition, etc.) are exempt from sequestration.
At this point, looking at sequestration for FY 2014-FY 2021 would mostly be speculation, so I would just focus on FY 2013.
For a broad perspective, the Washington Post has taken the White House information re: state-by-state impacts of sequestration and created a handy “cheat sheet” for different categories of spending: http://www.washingtonpost.com/wp-srv/special/politics/sequestration-state-impact/.
One final note: some people are arguing that sequestration does not cut funding and that it instead slows the growth of federal funding. In the out years, this argument is correct, but remember that we are starting from a low baseline after the Budget Control Act of 2011 imposed $1.5 trillion in cuts to discretionary spending over a decade. Also, if you measure discretionary spending as a percentage of GDP rather than in real dollar terms, sequestration cuts discretionary spending in the out years.
For FY 2013, which is the issue at hand, sequestration would, by any measure, cut funding: the federal government would go from $1.04 trillion in discretionary spending in FY 2012 to $947 billion in FY 2013.
Finally, note that the $1.5 trillion in cuts outlined above all came from non-Defense discretionary. That is why CDBG, HOME, law enforcement, Homeland Security have seen steep cuts since FY 2010. While it may be true that everyone needs to do their part re: deficit reduction, cities at this point can pretty easily say that they have done their part. (emphasis by Kevin)