Federal Budget, Local Hit

The first step for Congress as it works on the federal budget is to acknowledge the budget’s primary contradiction: It squeezes domestic programs, especially health care and the environment, while adding to the deficit. Given that the administration knows that some of its largest cuts – for agricultural subsidies, for instance – will not pass Congress and the cost of the war, Social Security reform and fixing the alternative-minimum tax are not counted at all, the bad news in the budget is actually worse than it first appears.

An important reason for this is the president’s proposal to make his tax cuts permanent. Congress, having been cajoled into going along with these cuts three times in the past, should this time reject them. With only a couple of exceptions, the 2001 and ’03 tax cuts most benefited a small number of people while jeopardizing the budget. The 10-year cost of making the cuts permanent as described in the president’s latest budget is $1.6 trillion – more than enough to solve the Social Security problem.

Instead, the tax cuts mean that important challenges, not only in Social Security, but Medicare and the deficit, remain unaddressed while cuts are made to community programs. For instance, in Maine approximately $20 million for community and economic development would disappear, according to the National Priorities Project. Low-income energy assistance would be cut by $3 million and another $3 million would be gone from the state’s clean water revolving loan fund. In all, nearly $90 million in the next fiscal year would be cut from funding for Maine under the president’s budget.

It is important to note that this is a rough number, based on assuming cuts within departments would be spread evenly and funding formulas for states would remain unchanged. The number for Maine could be lower than $90 million or it could be higher, but the states, overall, are being hit hard for the sake of tax cuts.

Democratic Rep. Mike Michaud recently presented an analysis of Maine programs affected. He says, for instance, that rural economic empowerment zones, such as Aroostook County’s, would be eliminated, grants for dealing with high energy costs, such as on Vinalhaven, would be cut and everyone’s favorite, community development block grants, would disappear. Maine got $15 million in CDBG last year.

Twenty-three states are expected to run shortfalls already in FY 2006, Maine included. Under the president’s budget, more states will join the 23 and more states will pass costs down to local communities. The result is a rise in unfunded mandates, a phrase that hasn’t been heard much in recent years but will return painfully soon.

No Child Left Behind is a good example. Whatever you think of its goals, everyone should agree that the added costs of the federal legislation should be accounted for by the federal government. Yet according to Rep. Michaud, NCLB has been underfunded nationally by $39 billion, and “11,005 children in Maine will go without promised help in reading and math and 8,812 will no longer be able to enroll in the after school programs that boost academic achievement and keep kids safe.” They will go without this help while locals try to make up the cost of the new federal rules.

The budget process will be long and will certainly produce more details than the public has now for assessing its impact. But the first look suggests needlessly difficult times ahead for states and a demand for congressional support to keep valuable local programs from being cut.