Wednesday, November 27, 2013

By: Derek Thomas

This blog is an update to the effects of the crisis-driven fiscal policy that has dominated Washington D.C. - now including a government shutdown - reported to have cost the U.S. economy $24 billion.

Sequestration is a package of automatic spending cuts enacted under the Budget Control Act (BCA) of 2011. Due to disagreements over fiscal policy during the 2011 federal budget showdown, the automatic triggers – equal to $85.3 billion – were proposed by President Obama and supported by a majority of both parties in Congress to incentivize an agreement . That has yet to happen. 
While sequestration has had an already harmful effect on Hoosier families (as detailed below), the bill to end a government shutdown and avoid default did not deal with sequestration, of which the second consecutive year of cuts (for Fiscal Year 2014, beginning October 1st 2013) is expected to cause exponential harm due to the compounding design of sequestration. According to the Bipartisan Policy Center"The full brunt of the cuts hasn't hit, and if we go down the sequester path for too long, we won't be able to reverse the devastating impacts."  Or, from the Center on Law and Social Policy (CLASP): "These cuts are likely to be more painful than the 2013 cuts because agencies are likely to have exhausted any carry-over funds from previous years that they may have used to cushion the effects of the sequester." Alternatively, and according to the Congressional Budget Office (CBO), eliminating the sequester would increase real GDP by 0.6 percent and full-time-equivalent employment by 800,000.

For comparison, here are the initial White House estimates of the sequester effects on Indiana, and a press release from Governor Pence on the state's proposed attempts at mitigating the effects. According to the Economic Policy Institute -  Indiana was 1 of 5 states to see the "largest percentage funding cuts for federal grants due to both the March 1 sequestration as well as the passage of the current continuing resolution..." These grants "aid states' efforts to provide infrastructure, education, and health and social services." 

Here's how that's played out for Hoosiers so far:

  • Head Start: In Indiana, more than 700 children (nearly 57,000 nationally) will have lost their opportunity to get a leg up before entering kindergarten due to the more than $4,000,000 in cuts to Head Start. Being only 1 of 11 states that does not have state-funded pre-kindergarten programs and high rates of child poverty, Indiana’s federal and state lawmakers should act swiftly to ensure the protection our of most vulnerable children. Within Hoosier communities:
    • Head Start programs in Franklin and Columbus resorted to a lottery system to determine which students would be cut from the program.
    • In Bloomington, 12 slots for Head Start students, 25 slots for home-based Early Head Start, 72 slots for summer programs, and 15 Head Start employees will be affected by the cuts. According to WXIN Fox 59 News, Monroe County is among the first to address sequester cuts.
    • WTHI - TV in Terre Haute reports that sequestration is responsible for "at least 20 children not able to attend Head Start...staffing cuts, and even the elimination of Head Start's full day program."
  • Unemployment Benefits: Federally extended unemployment benefits have been cut for the long-term unemployed by 10.7%. This cut affects the more than 30% of unemployed Hoosiers that have been unemployed for 26 weeks or more.  It's also important to note, as of the 4th quarter of 2012, 67.1% of unemployed Hoosiers were not receiving unemployment benefits - that's the 9th lowest ratio in the nation.
  • Meals on Wheels programs have been forced to cut, on average, 364 meals per week, according to a national survey from the Meals on Wheels Association of America. Within Hoosier communities:
    • Vulnerable seniors in rural Indiana that depend on the Meals on Wheels program for food delivery will have to find alternative methods of food delivery  as a result of the 10% cut to the program.
    • In Title III Older Americans Act, meals are provided through three sources: home-delivered nutrition services; congregate nutrition services and; nutrition services incentives program. Here is the breakdown of cuts to each funding source.
  • Federal Workforce Development Programs: From the National Skills Coalitions report on the Divesting in the Skills of America's Workforce, total cuts to key Federal Workforce Development Programs are equal to $9,617,195, affecting 28,090 Hoosiers. Cuts to programs include the Workforce investment Act (WIA) Programs, Career and Technical Education Programs, Adult Basic Education (ABE) Programs, Vocational Rehabilitation Programs and Wagner-Peyser Employment Services. 
  • Public Defender Services: Philip P. Simon, Chief Judge, Northern District of Indiana and Richard L. Young Chief Judge, Southern District of Indiana both signed on to a letter from the United States District Court that expressed "grave concern" that not only puts in peril the courts operations, staff, and public safety, but most significantly, "counsel for criminal defendants who lack the financial resources to hire an attorney", known as Public Defender Services.
  • Low-Income Housing Vouchers: Citing "substantial shortfalls in funding to renew the Housing Choice Voucher", the  Center on Budget and Policy Priorities estimates that sequestration could cut housing vouchers for up to 4,150 low-Income families by the end of 2014 (of the 35,532 families with assistance in Indiana). Within Hoosier communities:
    • The Fort Wayne Housing Authority has some serious concerns and states that the funds they get for their program are currently running at only 64% of what they were and could result in cuts to low-income housing vouchers.
    • The Indianapolis Housing Agency declared a nine-day furlough of its employees and is freezing hiring and capital expenditures. 
    • Updated (July, 2013): West Lafayette to See Budget Cuts After Sequester - City officials were notified that their Community Development Block Grant would be cut. WFII Channel 18 reports that West Lafayette uses CDBG dollars for infrastructure, housing and to fund non-profit service providers. 
  • Low-Income Home Energy Assistance Program (LIHEAP): The National Energry Assistance Directors' Association (NEADA) reported that  1,335 families in Indiana (nationally) lost energy assistance. From NEADA: "The outlook for the coming winter is especially grim since the Energy Information Administration has projected that the average cost of home heating will increase from $922 to $977." 
  • Special Education: From Pew States: Sequester Hits Special Education Like 'Ton of Bricks':  The "estimated reduction in dollars in federal funding to Indiana in fiscal year 2013 for Individuals with Disabilities Education Act Part B Grants, following the 5 percent sequestration cuts in funding" is equal to $12,376,969.
  • Farm Service Agency: According to the Palladium-Item: "Farmers and ranchers who participate in Farm Service Agency programs should plan for automatic spending reductions in fiscal year 2014 under the federal sequestration program." These programs include: "Dairy Indemnity Payment Program; Marketing Assistance Loans; Loan Deficiency Payments; Sugar Loans; Non-insured Crop Disaster Assistance Program; Tobacco Transition Payment Program; 2013 Direct and Counter-Cyclical Payments; 2013 Average Crop Revenue Election Program; 2011 and 2012 Supplemental Revenue Assistance Program; Storage, handling; and Economic Adjustment Assistance for Upland Cotton."
  • The National Institutes of Health estimated that the $1.5 billion in federal funding for medical research will not only result in direct and indirect job loss (including fleeing talent), but will have a  "disproportionate impact on our academic medical center and our ability to care for our sickest and most vulnerable patients, both now and in the future." Here's the effect that has on our own research institutions (Indiana University, Purdue University, Notre Dame) from Richard Buckius, Vice President for Research and a mechanical engineering professor Dr. Craig Brater - Dean of I.U. School of Medicine
  • Defense Spending: The Wall St. Journal reported in April 2013 that “defense spending tumbled by 33.2%, possibly reflecting spending cuts known as the sequester” – signaling a likely continuation of the activity listed below:
    • For the Indianapolis 500, federally funded flyovers during the race or any active duty military parades were cancelled. 
    • Furloughs 10,000 Civilian Defense Workers in Indiana - According to the Indianapolis Star, each worker will face 11 days of furlough. The Star also reports that, "[b]ecause these budget cuts were so large, they will force unavoidable changes for the city of 46,000." 
    • One thousand full-time guard staffers from Indiana National Guard are preparing for furloughs - resulting in a 20% pay reduction for 14 weeks.
    • According to WIBC: "This [most recent Veterans Day] marked the 50th year that a parade had been organized by the Veterans Day Council of Indianapolis, but missing this year was the usual military flyover. It was a victim of federal budget cuts mandated by the sequester."
    • 1,000 Indiana National Guardsman were furloughed for one week due due to the federal government shutdown.
    • The Indianapolis Air Show - an attraction that drew 80,000 visitors in 2012 - announced that they will permanently ground their air show. Citing a number of reasons, sequestration was the final straw.
  • Women, Infants and Children (WIC) Food and Nutrition Service: According to The Republic in Columbus, WIC in Bartholemew County are seeing full-time positions reduced to part-time jobs due to sequestration, and while services have not been cut yet, accessing these vital services could mean longer lines and reduced service delivery as staff attempts to do more with less. 
  • Federal Aviation Administration (FAA): On March 21st, the  FAA announced that it would be closing two airport control towers in the Gary and Columbus airports.  On April 15th, a handful of flights were cancelled or delayed as a result of the FAA furloughing 47,000 employees. You'll recall that Congress responded to these cuts with unprecedented swiftness and funding has been restored.
  • The Environment: According to the Northwest Indiana Times, investigations into "oil sheens, films and floating substances" in  local waterways are being "delayed by numerous setbacks caused in part by furlough days created by the federal sequester".
  • Cities and Towns:The Journal and Courier reported on a U.S. Conference of Mayors report that showed "most of Indiana's cities are struggling more economically in 2013 than they did in 2012." The report cited "across-the-board federal budget cuts known as sequestration and tepid economic growth in Europe."

Making a bad situation worse, many nonprofit organizations that deliver government services through federal or state contracts were already operating very lean, with reimbursements below costs, using philanthropic funds to make up the difference. The charitable sector simply cannot make up the difference or replace the lost funds. For example: Tri-State Food Bank (having already lost 1.4 million pounds of food due to budget cuts last year) has seen an additional half-million pounds lost due to sequestration cuts. With additional cuts to the Supplemental Nutrition Assistance Program (SNAP, or formally, Food Stamps) - affecting a total of 925,000 Hoosiers - similar shortages are expected in Lafayette's Food Finder Food Bank and the Lafayette Urban Ministry, and in Bloomington, the 27,500 Hoosiers that use Hoosier Hills Food Bank will lose a total of 114,000 meals per month. The Northwest Indiana Times reported that, as benefit levels are decreased as a result of SNAP cuts, more families are lining up for poor relief and food banks.

Congress’ inability to restore these cuts will continue to have a disproportionate effect on low-income Hoosier families, and the economy. Not only will the loss of employees and work hours have ripple effects as families are forced to spend less on basic needs such as rent, utility, food and more in local communities, these reckless and widespread cuts will only further exacerbate the Status of Working Families (see 2012 Report here) - defined by increasing poverty, declining opportunities, stagnating wages and challenges to educational attainment necessary to create high-wage job growth. 

TAKE ACTION: Follow this link (from Coalition on Human Needs) to contact your representative and senators and tell them that we need to invest in the services that allow our economy and people to move forward. You can also visit Our American Story (from Half in Ten and Coalition on Human Needs) to see how community leaders across the nation are working to expand economic opportunity for all through the power of their personal stories.

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