By Ed Smith
One puzzling aspect of the federal budget cuts known as
sequestration is that for all the arguing in Washington, D.C., about how they
will affect the economy, most Americans have seen little change in their
day-to-day lives.
A session at NCSL's Spring
Forum on Friday afternoon, however, made clear state lawmakers know the effects
are significant and mounting.
During a briefing on how sequestration is affecting states from
NCSL's Michael Bird, legislator after legislator brought up concerns they are
hearing from their constituents. The list runs the gamut, from Head Start to
military spending, from food programs for the elderly to general aviation, from
loss of federal jobs to the cancellation of military flyovers at summer
festivals.
"The only thing that can stop this is if the Republicans and
Democrats, and the White House and Congress, come to some sort of
agreement," Bird said, to laughter from the audience. "And you have a
huge stake in this."
The downbeat news on how the sequester will affect states followed
relatively positive reports on the overall state of the economy and
specifically on the state of state budgets.
Alison Felix, an economist with the Denver branch of the Federal
Reserve Bank of Kansas City, noted the housing market is rebounding across the
country, the labor market is expanding and consumer spending is continuing to
hold up,
"We did see growth as we first emerged from the recession
from the federal government," she said. "As government generally has
pulled back, private industry has filled some of the gap."
But, she warned, that private growth is "facing headwinds
from the cutback in federal spending."
At the state level, the outlook has the same blend of positive
signs, uncertainty over the strength of the recovery and concern about how
federal action will affect states.
Corina Eckl, NCSL's director of State Services, pointed to NCSL's
latest "State Budget Update," which found "states continue to move
along the same path of slow and steady growth that has gradually brought them
out of the economic nadir. The general outlook of state officials is one of
stability, with a dose of uncertainty."
Even with revenue projections meeting or exceeding expectations in
most states, Eckl said, there was plenty of concern about the future.
Lawmakers in the room pointed to several areas of worry aside from
the possible effects of the sequester. They included revenues from oil and gas
production, which cut both ways depending on your state. In Oklahoma, severance
taxes helped the state exceed its revenue projections, while Alaska reported
its revenues dropping along with production. Others said that while personal
income taxes collections were up in FY 2013, it could be a sign of trouble
ahead since many people decided to take capital gains before the end of 2012
because of uncertainty over tax policy.
Another issue "is the 13 states that are failing to meet
their sales tax forecast," Eckl said, pointing to that as one of the key
concerns in the "State Budget Update."
Lawmakers do have some ways of pushing back against the federal
cutbacks, Bird said, mainly by urging their their congressional delegations to
back some key measures, such as the Marketplace Fairness Act, which the Senate
will vote on Monday. That legislation would offer states some help by
collecting up to $23 billion a year in collected revenue on online and other
remote sales.
It won't solve all the fiscal woes states face, Bird said, but
it's a start.