How Michigan is impacted by automatic budget cuts

3:04 PM, Feb 25, 2013   |    comments
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WASHINGTON (Lansing State Journal) - In the last year and a half, Peckham in Lansing has watched its federal contracts shrink by more than 60 percent, largely the result of scaled-back military operations in Iraq and Afghanistan.

Now, the nonprofit organization that hires people with disabilities or other barriers to employment and sets them to work operating call centers for the State Department or sewing cold-weather gear for American soldiers, faces a different threat: deep, automatic, across-the-board spending cuts set to take effect Friday, barring congressional action.

At the highest levels, the effects of sequestration - the fancy word for the $85 billion in cuts that would take place this fiscal year - are beginning to be sorted out in case of its implementation. In Michigan, more than 8,000 defense workers could be furloughed or lose their jobs. At least one study says tens of thousands of jobs could be lost in the state because of reduced spending.

But that's just the start of it.

Head Start could be slashed, and aid to state schools with a high percentage of kids from low-income families could be cut by $27 million, affecting tens of thousands of students. Some 77,000 of Michigan's long-term unemployed people could lose hundreds of dollars in benefits over several months.

Many of the effects nationally, including a $46 billion cut to defense spending in the next seven months, are only being guessed at right now. On Wednesday, the Pentagon notified its estimated 800,000 civilian workers that most of them could soon be looking at once-a-week furloughs, even as temporary workers are laid off and maintenance contracts are deferred.

With Friday's deadline looming, everyone who does business with the federal government is looking for answers.

"We don't have any official information or notification or even heads up telling us what may or may not happen," said Mitch Tomlinson, Peckham's president and CEO. "We're all just kind of doing, 'What if?'"

In some ways, Michigan is lucky when it comes to sequestration: The cuts, which would continue over a decade, are split evenly between defense and domestic programs, and Michigan is not a particularly defense-heavy state. A report this week by Wells Fargo said the state is among those at the lowest risk from sequestration, with federal spending accounting for less than 3% of its gross domestic product.

But in other ways, Michigan and its citizens - be they defense workers, boaters, automakers, you name it - would almost certainly be hit.

Consider:

• A few weeks ago, Gov. Rick Snyder proposed spending $11 million to dredge dozens of harbors that the Army Corps of Engineers wasn't expected to get to this year. But sequestration could further limit the corps' dredging plans, potentially hurting both recreational boaters - and, in turn, tourism - as well as commercial shippers counting on deeper channels to carry larger loads with lake levels already low. As a side note, corps officials say sequestration shouldn't affect efforts to keep voracious Asian carp from reaching the Great Lakes.

• Federal regulators at the National Highway Traffic Safety Administration would largely be exempt from sequestration because they draw much of their funding from the Highway Trust Fund, which in turn is largely funded by gasoline taxes. But it could hamper the ability of officials at the Environmental Protection Agency from certifying that autos meet emissions standards, a requirement before new cars can be sold in the U.S.

• Federal Aviation Administration furloughs could result in flight delays nationwide as control towers at 100 smaller airports are closed. Coleman A. Young in Detroit, W.K. Kellogg in Battle Creek, Ann Arbor Municipal and others in Michigan are on the list for potential closure. And towers at somewhat larger airports, like those in Lansing and Ypsilanti, could lose midnight shifts.

• Park Service cuts could be felt at Isle Royale, Pictured Rocks National Lakeshore and Sleeping Bear Dunes, limiting operations and maintenance.

• Hundreds of millions of dollars could be cut in National Science Foundation funding, resulting in fewer research grants - an area where the University of Michigan annually places at or near the top. On Thursday, U-M Vice President for Research Stephen Forrest told the university's Board of Regents that sequestration could cost the school's research budget $40 million this year.

• Then there is the overall effect sequestration could have, with analysts saying it could reduce national growth to a level where the economy is plunged back into a recession. If that happened, it would slow Michigan business dramatically, particularly its bread-and-butter auto sales.

Debt ceiling fight
"I'm still hopeful we can avoid it," said U.S. Sen. Carl Levin, a Detroit Democrat who is pushing legislation that would raise money to avoid sequestration by closing tax loopholes. "It's kind of a mindless, irrational approach to budgeting across the board. It's inflexible, and it will have negative impacts on Michigan and across the country. ...It was never intended to go into effect."

Sequestration had a long gestation, about a year and half. Born in the deal between President Barack Obama and Congress that allowed the debt ceiling to be increased in 2011, the cuts were expected to be so draconian that a six-member supercommittee, which included Republican Reps. Dave Camp of Midland and Fred Upton of St. Joseph, would be able to break through the partisan gridlock.

They didn't succeed.

Now it looks as though the cuts, at least in the short term, could happen, even though no one seems to want them. Last week, Obama chastised Republicans for not giving in more on new tax revenues; Republicans fired back that the sequester was the Obama administration's idea and that he needs to embrace deeper cuts while protecting military spending.

While there is no clear path to an agreement now, few pundits in Washington would be surprised if the administration and Congress found a way to put off the sequester again, as they did in December when its looming effective date was Jan. 2.

But there is still plenty to fret about in the meantime. For instance, recipients of benefits under the federal Emergency Unemployment Compensation program, which helps stretch benefits for Michiganders from the basic 20 weeks to 56 weeks of payment, could face weekly reductions. Safety net programs such as Social Security and Medicare may be largely exempted from the cuts, but many education programs aren't.

Education cuts
The National Education Association said sequestration includes $3 billion in education cuts. In Michigan, those would translate to $27.3 million less in Title 1 funding, affecting some 30,000 students and potentially cutting 300 jobs. Special-education grants could be cut by $20 million, affecting nearly 10,000 students and potentially cutting 227 jobs.

The NEA based its figures on a formula for sequestration cuts developed by the nonpartisan Center on Budget and Policy Priorities.

As the Free Press reported two weeks ago, officials with Michigan Head Start expect sequestration to result in a cut of nearly $14 million, with 2,200 fewer children receiving nutrition, health care and social services under the program. Michigan Head Start Association Executive Director Robin Bozek said there is "simply no way we can absorb such a large reduction without cutting children, families and staff."

And the defense cuts cast a long shadow, especially at the Detroit Arsenal in Warren, home to the Tank Automotive Command (TACOM), which manages the Army's ground vehicle program.

The Army said Tuesday that some 6,700 civilian workers would be furloughed, with a loss of $40 million in pay, and another 950 private-sector jobs could be lost because of reduced military spending.

The Air Force, meanwhile, expects about 800 civilians, including some at Selfridge Air National Guard Base in Harrison Township, to be furloughed, as well. As with the other military furloughs, they wouldn't be expected to start until sometime in April.

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