The Budget Control Act of 2011: Impact on public services in Ohio

March 13th, 2012
   

Last year’s U.S. “Budget Control Act” reduced federal support for states, compounding fiscal woes here and across the nation.  Unless Congress acts to change this provision, Ohio can expect to lose about 9 percent of the federal money we receive for many programs in 2013. Cuts will continue through 2021.

Press Release
Download executive summary
Download report
Legislative Service Commission memo
See analysis by Center on Budget and Policy Priorities

 Executive Summary

At the request of State Representative Mike Foley, Ohio’s Legislative Service Commission examined cuts anticipated due to the Budget Control Act.  LSC’s analysis projects that the federal ‘sequestration’ (automatic, across-the-board reductions of funding) will take $312.6 million from Ohio next calendar year.  The memo acknowledges that the estimates rely on assumptions, with inexact predictions. Nonetheless, the findings are jarring.

The biggest blow will be to Ohio’s children.  Elementary and secondary schools, cut by $1.8 billion in the current state budget, face a $126 million federal loss next year, with eight long years of cuts like this pending.

The Budget Control Act of 2011

Last summer, Congress refused to allow the Administration to boost the debt limit to pay its bills, and insisted on direct budget cuts and spending control mechanisms in exchange. The Budget Control Act defined the terms of the exchange.  It raised the debt limit by an amount estimated to be sufficient through early 2013 and in exchange, it cut funding for public services by two trillion dollars over the next decade.  Half of this will be imposed through automatic across-the-board cuts of about 9 percent in 2013 followed by additional reductions in each of the following 8 years. This process, known as ‘sequestration’, will start in January 2013.

Federal Funds and Ohio’s Public Services

About a third of Ohio’s state budget comes from the federal government. Some programs, particularly in health and human services, get most of their funding from the federal government. The sequestration will also hurt universities, local governments and municipal housing authorities. Some programs are exempted from the federal law, including Social Security, Medicaid and other help with infrastructure, energy, poverty relief and tuition. But an estimated $3.6 billion in federal support for Ohio programs will be cut. The result will be larger class sizes for our children, reduced support for clean water, less job search assistance and workforce training, and weaker emergency management services. Some of the worst cuts from the sequestration include:

  • Ohio’s K-12 schools to lose $126 million in 2013 – Particular federal cuts include $51 million that would have helped Ohio meet federal standards under ‘No Child Left Behind’, $38 million from special education block grant funding, $11.7 million from rehabilitation services, $7.9 million from teacher improvement. The cuts continue yearly, sometimes going up or down, through 2021. All Ohio schools already faced drastic cuts from the state budget, which provides $1.8 billion less than the last state budget, before this further slashing from the federal law;
  • Work-study and supplemental aid to poor students – The sequestration will take $3.385 million from work-study, which could mean 2000 Ohio students won’t get work-study aid.  The additional loss of $2.6 million in an Opportunity Grant will also hurt low-income students. Ohio is already the third most expensive state in share of income the poorest quartile of families must pay for tuition. The sequestration is ratcheting down opportunity for our young people;
  • Health and human services to be reduced by $82 million. The Budget Control Act could reduce Ohio’s health and human services  – like child care, health clinics and substance abuse services – by nearly $82 million dollars. Over twenty percent of this hurts children’s services, including tough cuts to Head Start and child abuse prevention. The sequestration will take $6 million out of drug treatment in 2013. Working parents have less access to child care help already; the law is expected to slash another $7 million from Ohio’s child care and development block grant next year. Programs for maternal and child health, mental health, rape prevention and preventative health will be cut by 8.8 percent. Home energy assistance will lose $14 million in 2013, with eight long years of more cuts on the horizon;
  • Agriculture and food aid faces reduction of $18.5 million. Some families with very young children are provided with a critical nutritional program known as Women, Infants and Children (WIC), which now faces a loss of $16 million in federal funds under the law in 2013;
  • Housing and Urban Development to lose $39 million. The Act imposes reductions of about 9 percent across most discretionary programs.  Housing faces a loss of more than $25 million across several programs which help reduce homelessness, prevent foreclosure, and ease transitions. The community development block grant, long used as an important pillar in local neighborhood and economic development, faces a loss of $11 million.

Summary

Ohio communities were clobbered in the current state budget, and face the loss of $312.6 million more next year as automatic, across-the-board cuts in federal programs are implemented. These cuts fall especially heavily on Ohio’s kids. We’ve dramatically cut taxes to the wealthy and corporations at both the state and federal level. It is time to restore reasonable taxes on those earning $250,000 and above in Ohio, so that we can invest in our future and make up for these harmful federal cuts to our communities.


 

The Budget Control Act of 2011: Impact on public services in Ohio

Introduction

Last year’s U.S. “Budget Control Act” reduced federal support for states, compounding fiscal woes here and across the nation.  Unless Congress acts to change this provision, Ohio can expect to lose about 9 percent of the federal money we receive for many programs in 2013. Cuts will continue through 2021.

Ohio’s Legislative Service Commission (LSC) examined the anticipated cuts in this second phase at the request of State Representative Mike Foley.  Their analysis projects that the federal ‘sequestration’ (automatic, across-the-board reductions of funding) will take $312.6 million from public services for Ohioans next calendar year.  In the memo itself, LSC notes that the estimates rely on assumptions and that it is not possible to predict exactly. Nonetheless, the findings are jarring.[1] The biggest blow will be to Ohio’s children.  Beleaguered elementary and secondary schools, cut by $1.8 billion in the current state budget, face the loss of  $126 million in federal funding next year, with eight long years of cuts like this pending.

The Budget Control Act of 2011

Last summer, Congress refused to allow the Administration to boost the debt limit to pay its bills, and insisted on direct budget cuts and spending control mechanisms in exchange. The Budget Control Act, enacted on August 2, 2011, defined the terms of the exchange.  It raised the debt limit by an amount estimated to be sufficient through early 2013 and in exchange, it cut funding for public services by two trillion dollars over the next decade.   Just under half of the cuts will be achieved through spending limits. The other half will be taken by automatic cuts of about 9 percent in 2013 followed by additional reductions in each of the following 8 years.  The Act created a bi-partisan committee (the ‘Super Committee”) to hammer out an agreement on how to achieve a little over half of the cuts – $1.2 trillion – but legislators failed to agree to a plan within the specified time.  Therefore, services will be reduced through across-the-board budget cuts, a process known as ‘sequestration.’ Sequestration will start in January 2013. It will take automatic, across-the-board cuts to programs in 2013, but allow Congress more flexibility in 2014 through 2021.  It will therefore be harder for states to predict impact of the Budget Control Act of 2011 later in the decade.

Federal Funds and Ohio’s Public Services

About a third of the funding in Ohio’s state budget comes from the federal government. Some public services, particularly in the area of health and human services, get most of their funding from the federal government (Figure 1).[2]  The sequestration would impact universities, local governments and municipal housing authorities as well.[3]

Some important public services have been exempted from the federal law, including Social Security, Medicaid, Children’s Health Insurance, Temporary Assistance for Needy Families (TANF), and Supplemental Nutritional Assistance Programs (SNAP – formerly known as food stamps).  Some infrastructure and energy programs are exempted.  Pell Grants and tax credits for working poor families (Earned Income Tax Credit) are exempted.  Of the estimated $23.95 billion the federal government will provide to Ohio in FFY 2012,[4]  85 percent would be exempt from the sequestration.[5]  The remaining 15 percent – an estimated $3.6 billion – will be cut in ways that will affect most Ohioans: through larger class sizes for our children, reduced support for clean water, less access to job search assistance and workforce training, and even reduced support for homeland security programs for the state.

Ohio’s K-12 schools to lose $126 million in 2013 due to the federal sequestration

Elementary and secondary schools get about a fifth of their support from the federal government.  Schools across the state will feel the federal budget sequestration, particularly those serving lower-income families. According to the Ohio Legislative Service Commission, the federal budget sequestration may be expected to take more than $126 million from K-12 schools in 2013 compared with 2012.  For example, the 2045 Ohio elementary and secondary schools that in 2011 received federal aid to meet the standards of “No Child Left Behind” will see a cut of $51 million next year.  These funds, from Title 1 of the “Elementary and Secondary Schools Act,” can pay for tutors, and in schools where there are many families of low-income, they can be used to hire additional instructors. 

Investment in instruction matters to educational outcomes.  Wells Academy in Steubenville, where Governor Kasich gave his State of the State address, is a top elementary school in the state.  It is also one of the schools that gets Title 1 funds described above.  The Steubenville school district is characterized by an historically high share of funding devoted to instruction.  The outcomes of that investment have been positive.  The loss of instructional funds is bad for schools like Wells Academy and for all of Ohio’s children.  All schools in Ohio face drastic cuts from the state budget, which provides $1.8 billion less than the last state budget.  On top of that, they now face additional cuts from the federal law.

Other educational programs face deep cuts as well (Click here to see Table 1).  Special education block grant funding to Ohio will, for example, be reduced by $38 million statewide. Grants for rehabilitation services in Ohio’s schools will be reduced by $11.7 million in 2013; funds for improving teacher quality, by $7.9 million. And under the terms of the Budget Control Act of 2011, Congress must continue to reduce public services each year through 2021.

Work-study and supplemental aid to poor students to be hit

Ohio’s colleges and universities lost a half billion dollars ($498 million) for classroom teaching in the current state budget because legislators did not replace federal stimulus funds that supported colleges and universities in the recession, but expired in 2011. Students will be hit again as the sequestration reduces funds that help with college costs in 2013. The law will take $3.385 million from work-study, which may mean than 2000 Ohio students won’t get work-study aid, or everyone’s aid package, which averaged $1,642 (nationally) in 2011,will be reduced. [6] The additional loss of $2.6 million in the ‘Supplemental Educational Opportunity Grant’ will also hurt students from low-income families who can’t afford tuition. This is not uncommon scenario in Ohio, where tuition is high. 

According to the National Center for Higher Education Management System, Ohio is the third most expensive state in the nation in terms of the share of income families must pay for tuition at a four-year public university; the fifth highest in terms of two-year colleges.[7] At the community college level, 80 percent of students receive financial aid; at the main campuses of public universities, 84 percent of students get financial aid.[8]  Ohio is a state in which financial aid is important, yet the sequestration may take funds over and over in these programs through 2021, ratcheting down opportunity for young people in the state.

Health and human services to be reduced by $82 million

The Budget Control Act may be expected to reduce Ohio’s health and human services – like child care, health clinics and substance abuse services – by nearly $82 million dollars as a result of the law.   Over twenty percent of this cut impacts services to children directly (Table 2).

All health and human services programs support families in need, so the cuts to basic block grant programs in social and community services will hurt children and parents alike (See tables for complete list of expected sequestration cuts in health and human services in the appendix).  In Ohio, where drug addiction is epidemic in some places and funding for community treatment has been cut by almost two thirds over the decade,[9] the federal law will take another $6 million out of the system in 2013 and could continue to cut, year over year, through 2021.  Working parents who need help paying for child care are less likely to qualify than in the past because of state cuts; the sequestration is expected to slash another $7 million from Ohio’s child care and development block grant next year. Programs for maternal and child health, mental health, rape prevention and preventative health will be cut by 8.8 percent. Home energy assistance will lose $14 million in 2013, with eight years of more federal cuts possible on the horizon.

Agriculture and food aid faces reduction of $18.5 million

The use of Supplemental Nutrition Assistance Program (SNAP – formerly known as food stamps) skyrocketed in Ohio due to the recession. SNAP is protected from the sequestration. However, some families with very young children are provided with a critical nutritional program known as Women, Infants and Children (WIC), which now faces a loss of $16 million in federal funds under the law in 2013.  According to Ohio’s 2010 annual report for WIC, 297,672 Ohioans in families with children need supplemental nutritional assistance.  This includes 66,206 women, 74,011 infants and 157,455 children.  More than half of all infants born in the state needed WIC services in 2010, even though more than half of those children had working parents.[10]

Housing and Urban Development to lose $39 million

The budget control act imposes reductions of about 9 percent across most discretionary programs.  Housing services, including public housing, face a loss of more than $25 million across several programs.  Subsidized housing is a critical social service that lets people with mental health issues gain stability; prisoners re-enter society, and families facing foreclosure avoid the homeless shelter.

The community development block grant, long used as an important pillar in local neighborhood and economic development, faces a loss of $11 million.

Summary

Public services in Ohio have been clobbered in the current state budget, and face the loss of $312.6 million more next year as automatic, across-the-board cuts in federal programs are implemented.  Although some important programs are exempted, cuts to non-exempted programs will be about 9 percent in 2013, and cuts will continue through 2021.  Because children are dependent on public funding for schools, and many need social services, public health and food aid, these cuts fall especially heavily on Ohio’s kids.

Tax cuts to the wealthy and corporations have eroded resources for public services families need.

Yet Ohio’s legislators go back into budget deliberations considering further tax cuts instead of ensuring safe streets and classrooms.  We encourage legislators to refocus on the well-being of the people. Over 80 percent of Ohio’s college students get aid to help to pay tuition – and the federal government is cutting its contribution.  More than half of the infants in the state depend on nutritional assistance from the WIC program – which faces eight years of federal cuts. Ohio’s legislators need to be mindful of these pending federal cuts as they consider budget issues this spring. 

Ohio has had almost seven years of tax cuts, and lost hundreds of thousands of jobs during that time.  America has reduced its tax rates on the very top income tax bracket that the wealthiest pay from 70 percent in 1980; [11] today, some of our wealthiest citizens pay less than their secretaries.  It’s time to prioritize the needs of working families and their children.   


[1] The Ohio LSC analysis is contained in a memo that can be accessed on the web page of this report. It is based on data provided for each state by the Federal Funds Information for the States (FFIS), a joint service of the National Governors Association and the National Council of State Legislatures. The data is on possible state-by-state impact of the sequestration. It is important to note that projections are estimates and are not complete; exempt or non-exempt status of some programs or parts of programs are yet to be determined and are exempted from the FFIS data because of lack of clarity.  Assumptions used by FFIS and LSC are addressed in the memo, which is available at a link on the same page as this report on the Policy Matters Ohio website.

[2] See A Dozen Ways the D.C Deficit Discussion Hurts Ohio, Sept. 6, 2011, available at http://bit.ly/yIem66.

[3] See Ohio Legislative Services Commission  (“LSC”) analysis on the web page of this report.

[4] This figure includes 210 federal grant programs passed down from the federal government to entities in Ohio.  156 of the 210 grant programs are not exempt from the sequestration. See LSC memo on the website of this report

[5] Ohio LSC analysis, cited above, on the website of this report.

[6] Federal Education Budget Project at http://bit.ly/trzfSB; to arrive at the figure of 2000, we took the cut in federal work study for Ohio in 2013 ($3.385 million) divided by $1642.

[7] National Center for Higher Education Management Systems Information Center at http://bit.ly/A5Brub.

[8] Ohio Board of Regents, Financial aid given to first-time, full-time, degree-seeking students, 2009-10 at http://bit.ly/yJHXUa.

[9] Ohio Association of County Behavioral Health Authorities, “Copy of the History of ODADAS and ODMH Non-Medicaid Funding with Chart,” 2002-2013.

[10] Ohio WIC annual report 2010 (Women, Infants and Children program).