TIGHTENING BUDGETS

Finally, agreement. The $389 billion omnibus appropriations bill passed by Congress, according to conservatives, is a model of fiscal restraint; and, according to liberals, a deliberate squeeze on domestic spending. Either way, they are saying the same thing – the federal government in 2005 will be spending less on programs such as college grants and subsidized housing. The states should take notice.

They should notice because they have begun picking up the slack in some programs and will pay for more if they want to maintain services. The popular State Children’s Health Insurance Program will cover fewer kids under the budget, Pell Grants will have money for 85,000 to 90,000 fewer students and nearly 1.2 million will see smaller grants, according to the Center for Budget and Policy Priorities. There’s less money for Community Development Block Grants and the federal education act, No Child Left Behind, was flat funded, resulting in a loss with inflation. The Low Income Home Energy Assistance Program (LIHEAP) went up in funding, but not nearly enough to match the expected increase in the price of fuel.

Overall, according to the center, domestic spending, exclusive of Homeland Security, dropped by about 1 percent between 2004 and ’05, not counting inflation. The reason for the tightening budget is simple: Fiscal Year 2005 joins the two previous years for being supplied with the lowest tax revenues as a share of the economy since 1959 – the three major tax cuts since 2001 have had a serious effect on budgeting.

But if Congress is hoping to lose the deficit with these cuts, it will be disappointed. These programs make up only about 15 percent of total spending; a 1 percent cut of this 15 percent saves about $3 billion. The 2004 deficit was $477 billion.

The reason this should worry states is clear enough. Less money from Washington means either more cuts to programs or more state taxes. If you happen to live in a state that gives to the federal government considerably more than it gets back – such as Connecticut or New Jersey – this shift may not be such a bad thing. But if you live in Maine or a state that counts on the federal government for more than what it sends in taxes, the cuts create problems. Governors can yell all they want about this; Congress will react when voters become concerned enough to protest.

The omnibus bill included nine appropriation bills over thousands of pages, which most members of Congress did not see until the morning of the vote. They had only a general outline of what they were voting on, and though bad ideas such as giving Appropriations chairmen access to private tax returns or to sneak in an anti-abortion measure without debate were found, other objectionable pieces of legislation have yet to be. The process was nothing to be proud of, as the results over the next year likely will show.