AUGUSTA — State lawmakers say impending cuts in federal spending will have a significant impact in Maine, a state reliant on federal funding.
Congress and President Barack Obama this week averted a government default by reaching a last-minute deal to raise the federal debt ceiling in exchange for about $2.2 trillion in deficit reduction.
State officials on Wednesday were still assessing the effects of the deal and its $900 billion in upfront cuts. The remaining $1.4 trillion in reductions won't be determined until later this year when a congressional super-committee attempts to craft another agreement identifying specific reductions in federal programs.
State Rep. Patrick Flood, R-Winthrop, co-chairman of the Legislature's Appropriations Committee, said lawmakers would begin assessing likely scenarios when the panel reviews an analysis from the state's Department of Administrative and Financial Services.
Flood predicted that the cuts from the congressional super-committee will force lawmakers to make some difficult adjustments to the state's current biennial spending plan.
"I expect that we’ll see reductions in federal funding, which would mean either increasing our state funding or looking at reductions of some services," Flood said.
He added, "My guess is that we’ll probably be reviewing an unpleasant supplemental budget in early January stemming from reductions in federal funding. We’ll get through it, but I expect that we’ll see that."
Flood said he was more concerned that the partisan brinkmanship that plagued the debt-ceiling debate will play out again in committee, a fear shared by Rep. Peggy Rotundo, D-Lewiston, the ranking Democrat on Appropriations.
"I think there's a good chance that (the political stalemate) will continue, which means we're at their mercy," Rotundo said.
The debt-ceiling deal precludes the super-committee from cutting so-called entitlement programs like Social Security. However, the committee will target discretionary programs, such as low-income heating assistance, Medicaid, grant funding for education, health care and job training.
Sawin Millett, Gov. Paul LePage's chief finance officer, said cuts in federal funding could affect just about every branch of state government. Millett said it was too early to tell how the deal will affect Maine, given that the congressional committee had yet to identify the bulk of the federal spending cuts.
Nonetheless, some national organizations are forecasting that the federal government's decision to tackle the national debt and embrace an ideology of austerity will be felt the most at the state level.
National groups like the Economic Policy Institute say the majority of the belt-tightening will occur in state and municipal governments. And unlike 2009, when Obama and Congress passed a massive stimulus bill to blunt the recession, local governments will feel the full effect.
The debt-ceiling deal, dubbed by lawmakers the Budget Control Act, is expected to cut $500 billion over the next 10 years. According to the Center on Budget and Policy Priorities, nearly one-third of those funds typically flow to states.
The impact is expected to be difficult for states dependent on federal funding. In 2008, Maine was ranked 13th among states most reliant on federal money, which made up 24 percent of the budget, according to the nonpartisan organization Federal Funds for the States. The national average is about 20 percent.
With the debt-ceiling deal done, the focus now shifts to the 12-member super-committee which will be composed of six Republicans and six Democrats. The panel is tasked with identifying $1.4 trillion in spending reductions, an effort some fear will be marked by partisan entrenchment.
But some national pundits aren't so sure. Some say both sides could be compelled to negotiate in good faith because the deal Obama signed Tuesday automatically cuts defense spending and other programs if the panel can't reach a compromise.
The trigger cuts would turn the deal's current $350 billion slash in defense spending over the next decade into more than $600 billion. Either outcome could also have a big impact at Bath Iron Works, the state's largest employer.
Flood, the Republican co-chairman on the Appropriations Committee, said he hopes federal lawmakers can shelve the partisan rancor.
"I hope they can keep the momentum moving," he said. "… The more uncertainty we have, the less work we can do."