RI Could Lose Billions in New Federal Cuts
Friday, November 18, 2011
Rhode Island stands to lose a huge chunk of the more than $6 billion in federal funding it receives each year if a special Congressional committee can’t agree on how to balance the federal budget by next week, GoLocalProv has learned.
The so-called Congressional super committee has just days to reach a historic deal on reducing the national debt by $1.2 trillion. Otherwise, federal discretionary spending on defense and domestic programs will be automatically slashed between 5.5 percent and 10 percent, costing Rhode Island a substantial chunk of its annual federal funding, which totaled $6 billion in 2011, when things like Social Security checks and defense contracts are included, according to federal budget records.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTThe cut in spending would be the largest in two decades, according to Paul Van de Water, senior fellow at the Center on Budget and Policy Priorities. “You’d have to go back to at least the 1993 budget deficit reduction package to be talking about comparable cuts,” Van de Water said. “This would certainly be the largest in the last 20 years.”
Entitlement programs like Social Security and Medicaid would be largely unscathed while discretionary spending on transportation, education, health, and defense contracts could take the hardest hits, according to Van de Water.
“All of these discretionary programs are facing substantial cutbacks and that can affect people in lots and lots of ways,” Van de Water said.
In Rhode Island, the lost funding could heap millions onto the state budget deficit next year. It could de-fund programs and positions throughout state government and delay repairs to bridges and roads that are necessary to public safety. And it could suck millions of dollars out of the health care and defense industries—two sectors that are vital to the state economy.
Congressman David Cicilline warns that such drastic reductions would “ultimately impede job creation and economic growth” in Rhode Island. (See below for more on Cicilline’s outlook on the super-committee.)
A one-two punch for state budget
All this could be a double whammy for the state budget. Not only could state departments and agencies could see their budgets slashed, but the state might be called upon to help cities, towns, and school districts that lost their federal funds—all at a time when it still faces a structural budget deficit.
“Shifting these burdens to the state isn’t going to be a help,” Van de Water said.
Thomas Mullaney, the state budget officer, said he is keeping a close eye on the unfolding events in Washington. “I would think there would a significant cut if the feds were to do an across the board reduction,” Mullaney said. “It’s a big concern depending on the area it impacts.”
He estimates that the state budget could lose anywhere from $100 million to $200 million starting in the 2013 fiscal year, which begins next July. That roughly equals the projected budget deficit for 2013, which now stands at $125 million to $150 million, according to Mullaney. The slashed funds “could be a problem” if the state decides to pick up programs that the federal government dropped, Mullaney said.
“Whether or not it hits everybody the same is the question,” he said.
It’s too early to pinpoint where the ax will fall, because all the automatic federal cuts will actually do is shrink the pot of money that’s available, state officials told GoLocalProv this week. Where the money in that smaller pot is distributed is a decision that Congress would still have to make farther down the road.
Even if the super-committee does actually break through political gridlock and strike a deal, Rhode Island and other states will still face the specter of reduced funding, depending on what kind of a compromise is reached in Washington. “Whether it’s automatic cuts or some agreement by the committee, it’s going to cut spending in Rhode Island either way,” Van de Water said.
The austerity is quite a turnaround from just a few years ago when federal spending in Rhode Island reached an all-time high of $10.5 billion, in federal fiscal year 2009. One year ago, federal spending in the Ocean State remained high, at $8.9 billion, which was a billion more than the annual average of $7.5 billion over the past decade, according to federal budget records.
What’s on the chopping block
Some state departments are already bracing for the potential impact of deep cuts.
Yesterday, Steven Costantino, the Secretary of Health and Human Services in Rhode Island, ordered his staff to compile a list of those programs most vulnerable to reduced funding in the five departments his office oversees.
A draft list his office provided to GoLocalProv shows a wide range of programs could be affected, including the Low Income Home Energy Assistance Program, child care for low-income families, community health centers, substance abuse counseling services, and WIC, which provides supplemental food and other support for low-income women who are pregnant, infants, and children up to 5 years old.
At the Department of Transportation, officials are already confronted with longstanding funding challenges, which have resulted in a backlog of road and bridge repairs. “Anything that takes away from what we’ve already got is going to exacerbate that problem,” spokesman Charles St. Martin said.
One project that is a leading candidate for further delay is the reconstruction of the Providence Viaduct—the 1,300-foot bridge which carries Interstate 95 through much of the downtown and handles about 165,000 cars and other vehicles every day. The badly deteriorated deck for the bridge needs to be replaced as well as the steel girders. Underneath the bridge, the concrete has become so degraded that the DOT has installed wooden planks to keep pieces from falling onto cars on local roads below it.
Reconstructing the bridge has a price tag as high as $177 million, which St. Martin said is hard to fit into the budget for any one year. So far, only $24 million has been set aside for the work.
Another project susceptible to delay is the reworking of the Routes 6 and 10 interchange. “That’s a very costly project that we’ve been struggling to program for years,” St. Martin said.
Hit in health care funding
Meanwhile, the Rhode Island Hospital Association is up in arms over a potential automatic 2 percent reduction in Medicare reimbursements, which the association estimates could cost local hospitals $122 million over the next decade. Combined with reductions from the national health care reform law, the association projects that $614 million worth of federal funds for hospitals could vanish over a ten-year period.
The new cut in Medicare would put a further strain on hospital budgets, since even the current reimbursement levels do not cover the full cost of care for a patient, according to Mike Souza, the vice president for finance at the hospital association.
The state’s nursing homes are caught between a rock and a hard place. Either scenario—super-committee cuts or automatic cuts—will impact their services, according to Virginia Burke, president of the Rhode Island Health Care Association, which represents 62 out of the 84 nursing homes in the state.
One proposal that leaked out from the closely guarded proceedings of the super committee would change the way the federal government reimburses the state for Medicaid. The proposed change could cut between $31 million to $80 million in available federal Medicaid funding, according to Burke. The alternative scenario, in which Medicare reimbursements are trimmed back by 2 percent, also would affect nursing home budgets, Burke said.
She said the cuts could impact the quality of life for nursing home patients by spreading certified nursing assistants thin. Currently a CNA might have six or seven patients. With less funding, a CNA might have to take on eight or nine patients, which means less time to spend with patients and delays for someone who needs help getting out of a chair or getting dressed.
“It won’t necessarily kill people. We can still keep everyone alive and reasonably healthy, but we want to do more than that,” Burke said.
Cicilline ‘confident’ in super-committee
In the nation’s capital, there aren’t great expectations for success on the super-committee, according to Van de Water. “The expectation is something less than 50-50, but it’s highly uncertain,” he said.
Congressman David Cicilline offered a somewhat more optimistic assessment of the situation.
“I remain hopeful that this group of legislators can find a bipartisan solution,” Cicilline told GoLocalProv. “I am confident members of the Super Committee will work hard up to their deadline in order to avoid the drastic cuts that would be triggered by their failure to reach agreement—cuts that will ultimately impede job creation and economic growth in Rhode Island and the nation.”
Cicilline said his top priority remains getting Rhode Islanders back to work, which he said means continuing investments in job creation, strengthening the economy, and protecting “the most vulnerable citizens.” He said he also remains committed to putting “our budget on a track to long-term sustainability.”
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