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PA: Fiscal cliff not so steep in Keystone State budget

By   /   December 13, 2012  /   News  /   No Comments

By Eric Boehm | PA Independent

HARRISBURG — If and when the nation goes over the so-called “fiscal cliff,” it will be more like a fiscal pothole for Pennsylvania.

State officials estimate that Pennsylvania stands to lose about $300 million in federal grants and subsidies if the nation plunges over the cliff on Dec. 31.  It sounds like a big number — and for the programs funded with those dollars, it certainly is — but in the grand scheme of things the cuts would be a drop in Pennsylvania’s fiscal bucket.

A little perspective: $300 million is less than 1.5 percent of the $21.5 billion in federal funding received by Pennsylvania for the current budget year.

FISCAL POTHOLE: The “fiscal cliff” will bite into only a small portion of Pennsylvania’s $21.5 billion federal funding.

And that same $300 million represents only about 0.5 percent of the state’s $63 billion total operating budget, which includes the general fund, all federal funding and off-budget accounts like the state lottery and transportation fund.

Jay Pagni, spokesman for Budget Secretary Charles Zogby, acknowledged Thursday that the total cuts are a small part of the state’s federal funding.

“However, those are still important programs that are, in many cases, aimed at the lowest income and most vulnerable of Pennsylvania’s residents,” Pagni said. “That is the real danger of the fiscal cliff and sequestration.”

The so-called “sequestration” is the official term for $1.2 trillion in scheduled spending cuts that are tied to the fiscal cliff scenario.  The other half of the cliff is the expiration of the Bush-era tax cuts.

The Congressional Budget Office expects the sequestration to affect about 8 percent of federal spending on the line items contained within it.  Some programs — including food stamps, welfare payments, unemployment compensation and transportation funding — are exempt from the cuts.

If the sequestration cuts become reality, Pennsylvania stands to lose about $33 million in federal funding for special education and $43 million for the Title One program, which helps pay for basic education in school districts in low-income areas.  About 870,000 Pennsylvania students are enrolled in those two programs.

The state also will lose $19 million in food assistance for women, infants and children, $8.5 million for job training and workforce investment programs and about $5.5 million for a series of community and economic development block grant programs.

Even as the federal government faces a spending crunch, revenues at the state level is expected to be mostly flat next year.

Zogby said last week that departments and agencies affected by the federal spending cuts should not expect much help from the state.

“The guidance has been: Don’t expect that the state is going to backfill any lost federal dollars,” Zogby said.

Bill Patton, spokesman for House Democratic Leader Frank Dermody, D-Allegheny, said those decisions should be made when the budget is drawn up and the revenue situation is clearer.

“It’s very unwise to make a blanket statement like that, months in advance of when the state budget will be worked out,” Patton said.

Pennsylvania is not alone in its reliance on the federal government for a substantial portion of  its revenue. In fact, it’s actually more self-reliant than many other states, according to new data from The Tax Foundation, which ranks the states in terms of dependency on federal hand-outs.

Mississippi tops the rankings by getting 49 percent of its annual budgetary revenue from the feds, while Alaska ranks last because only 24 percent of the state’s budget comes from Washington.

Pennsylvania is just about in the middle.  The Keystone State gets 34 percent of its budget from the federal government, ranking it 33rd in the nation – just ahead of Illinois and right behind Maryland.

The Washington, D.C., think tank arrived at its figures by dividing each state’s “intergovernmental revenues” into its overall “general fund revenues.”

Contact Eric Boehm at [email protected] and follow @PAIndependent on Twitter.