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Sad State: Federal Spending Cuts Will Hurt Cities and Towns Across America

By Alain Sherter

Updated on: August 17, 2011 / 1:32 AM EDT / MoneyWatch

Your state is likely preparing to lay off police officers, eliminate pre-K programs and slash other social services. And that was before the government's plan to chop more than $2 trillion in federal spending over 10 years, cuts that inevitably will hit local budgets. Reports the Center on Budget and Policy Priorities:

Of the 47 states with newly enacted budgets, 38 or more states are making deep, identifiable cuts in K-12 education, higher education, health care, or other key areas in their budgets for fiscal year 2012. Even as states face rising numbers of children enrolled in public schools, students enrolled in universities, and seniors eligible for services, the vast majority of states (37 of 44 states for which data are available) plan to spend less on services in 2012 than they spent in 2008 â€"- in some cases, much less.

The "Budget Control Act" will make things worse in communities across the country because one-third of the non-defense discretionary spending reductions the feds are planning flow through state coffers, the Washington think-tank notes. As the tap on such funding closes, states will have no choice but to cut back on things like health care, education, welfare and law enforcement.

Squeezing the vulnerable
Let's finger the wound for a moment to get a better sense of what such cuts really mean at the local level. Here's a representative sample of what states are doing:

Arizona. Halting enrollment in Medicaid, eliminating coverage for 100,000 adults and 30,000 poor parents; extending a freeze on health care care services for low-income children.
California. Raising community college tuition by nearly 40 percent and reducing funding for the University of California and California State University systems by a total of $1.3 billion; trimming job training services and programs aimed at helping parents get off welfare and find work.
Colorado. Reducing funds for medical, dental and long-term care services for poor adults and children, limiting the number of visits for routine care and physical therapy.
Illinois. Cutting funding for state-run developmental disability and mental health centers, including early intervention and treatment services for children.
Louisiana. Reducing state support for child and family services, including for abused children and victims of domestic violence.
Michigan. Decreasing monthly financial assistance for poor people with disabilities; eliminating funding that helps poor families pay for funeral expenses.
Nebraska. Ending food, health care and cash assistance for elderly and disabled immigrants who have not been in the country for at least five years.
Ohio. Cutting state K-12 education funding in 2011 by 7.5 percent, the equivalent of $400 per student and nearly 14,000 teachers' salaries.
Oklahoma. Raising copayments for low-income parents receiving child care assistance, affecting 13,000 families.
Texas. Cutting programs to prevent child abuse and neglect.

Some states that are slashing spending on social services -- a reduction that will hurt economic growth, it's worth remembering -- are also cutting taxes for corporations and other businesses. For example, Arizona reduced the corporate income tax rate from 6.9 percent to 4.9 percent and lowered commercial property taxes by 10 percent. That will cost $38 million, or 4 percent of the state's 2012 budget gap. In Michigan, officials eliminated the state's major business tax outright, replacing it with a flat 6 percent corporate income rate. Cost? More than $1 billion in 2012 alone.

In Wisconsin, where Gov. Scott Walker last year threatened to fire state employees who didn't accept pay and benefit cuts, officials lowered taxes on corporations and high-income individuals by more than $90 million. At the same time, the state is cutting funding for elementary, secondary and higher education; moving to reduce eligibility for state child-care assistance; and scaling back tax credits for 152,000 low-income families.

Bargain basement
In other words, such states are reducing revenue even as they crop their budgets. Ostensibly, the idea is to boost economic growth by making a state an attractive place to do business. But that presupposes that high taxes are causing the economic slump. They're not. The economy is suffering because consumers and small businesses remain mired in debt, curbing spending. Among developed countries, meanwhile, U.S. corporate tax rates are already among the lowest in the world.

Such fiscal policies will weaken states, cities and other localities. They will deepen existing divisions between society's have's and have-nots. And they make a mockery of any talk talk of "grand bargains" and "shared sacrifice."

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