Debt and Deficit Deals Call for Cuts

Wednesday, 03 Aug 2011 12:28 PM

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The debt and deficit deal is likely to lead to steep cuts in state budgets. While the measure does not specify any reductions, federal dollars make up a third of state revenue, making cuts inevitable, The Washington Post reports.

"The debt-limit deal inevitably will lead to large federal cuts in programs for state and local governments," Nicholas Johnson, vice president for state fiscal policy at the Center on Budget and Policy Priorities, told the Post. "This is going to begin in the middle of the worst year for state budgets."

The debt-ceiling deal calls for a $900 billion reduction in projected domestic spending and a special congressional committee has been created to come up with an additional $1.2 trillion in cuts. A key target for cuts is Medicaid, the largest source of federal aid to states. "They might be looking at Medicaid in the second round of cuts," National Association of State Budget Officers' Brian Sigritz tells the Post. "Transportation and infrastructure programs also could be cut back."

The cuts would come at a bad time for states that have faced $100 billion in budget gaps this year on top of about $400 billion in budget shortfalls in the previous three fiscal years. The Center on Budget and Policy Priorities reports that as a result of the recession, 34 states cut K-12 education funding, 43 college funding, and 31 health care. Since 2008, state and local governments have cut 577,000 jobs, the Post reported.

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