Are State Leaders Ready for Big Cuts in Federal Funds?

Topnotch finance experts assess risks and plan for downturns as diligently as they evaluate and promote upside opportunities.

Mississippi’s economy has become more reliant than ever on federal funds. Should President Donald Trump and conservative leaders succeed in their plans to slash federal spending, the risks to our state economy would be substantial, if we aren’t ready.

So, do our state leaders have topnotch experts assessing risks facing state finances? If so, what do their forecasts show should federal dollars decline dramatically? And what are our leaders’ plans should the cuts come true?

The President’s guiding light for federal spending cuts appears to be the Heritage Foundation. Its “Blueprint for Balance: A Federal Budget for Fiscal Year 2018” calls for another base closure round (BRAC), cuts to food stamps (SNAP), auctioning off TVA, cuts to FEMA, cuts to Medicare, Medicaid, and Veterans’ benefits, cuts to Earned Income Tax Credits and Additional Child Tax Credits, and eliminating Head Start, the National Endowment for the Arts, the National Endowment for the Humanities, the Economic Development Administration, the Appalachian Regional Commission, Americorps, SSI benefits, rural airport subsidies, all WIOA job-training grants, and much more. Long-term recommendations include cost-cutting reforms to Social Security, Medicare, Medicaid, and education.

Read the entire document here: http://www.heritage.org/budget-and-spending/report/blueprint-balance-federal-budget-fiscal-year-2018.

Then, consider these facts.

Mississippi’s Joint Legislative Budget Committee Budget Bulletin for fiscal year 2017 showed $8.3 billion, or 44%, of Mississippi’s $18.9 billion total budget funded with federal dollars. That’s up from $3.5 billion, or 35%, of Mississippi’s $9.9 billion budget in 2000.

Indeed, the latest Tax Foundation rankings had Mississippi moving to the top as the government most reliant on federal aid.

But the money flowing through state government is a small part of the overall inflow of federal funds to Mississippi.

The Bureau of Economic Analysis (BEA) showed over $27 billion in transfer payments to Mississippians for 2015, more than double the $11.5 billion for 2000.

These are mostly federal funds transferred through government programs to benefit individuals. The programs include Social Security, Medicare, Medicaid, SNAP, SSI, Veterans’ Benefits, Earned Income Tax Credits, Temporary Assistance for Needy Families, unemployment benefits, and education grants and benefits … all targeted for cuts under the Heritage plan.

In addition to transfer payments, funding for Mississippi’s federal employees and federal contracts would be at risk. The National Priorities Project reported that 53,720 people in Mississippi worked for the federal government in 2014 bringing in about $3.9 billion in federal funds. The think tank also reported the federal government paid about $3.8 billion to vendors to perform contracts ranging from supplying the military with weapons to building websites.

The Pew Charitable Trusts estimates 32.9% of Mississippi gross domestic product (GDP) comes from federal spending.

Surely state leaders are not ignorant of the economic risks posed by proposed cuts and are readying plans to cope with what Washington decides?

They owe it to taxpayers to reveal their readiness and plan details.

Standard and Poor’s, Fitch, and Moody’s credit rating services, which have recently issued negative outlooks on state finances, probably want to know too.

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