By Ed Smith
One puzzling aspect of the federal budget cuts known as sequestration is that for all the arguing in Washington, D.C., about how they will affect the economy, most Americans have seen little change in their day-to-day lives.
A session at NCSL's Spring Forum on Friday afternoon, however, made clear state lawmakers know the effects are significant and mounting.
During a briefing on how sequestration is affecting states from NCSL's Michael Bird, legislator after legislator brought up concerns they are hearing from their constituents. The list runs the gamut, from Head Start to military spending, from food programs for the elderly to general aviation, from loss of federal jobs to the cancellation of military flyovers at summer festivals.
"The only thing that can stop this is if the Republicans and Democrats, and the White House and Congress, come to some sort of agreement," Bird said, to laughter from the audience. "And you have a huge stake in this."
The downbeat news on how the sequester will affect states followed relatively positive reports on the overall state of the economy and specifically on the state of state budgets.
Alison Felix, an economist with the Denver branch of the Federal Reserve Bank of Kansas City, noted the housing market is rebounding across the country, the labor market is expanding and consumer spending is continuing to hold up,
"We did see growth as we first emerged from the recession from the federal government," she said. "As government generally has pulled back, private industry has filled some of the gap."
But, she warned, that private growth is "facing headwinds from the cutback in federal spending."
At the state level, the outlook has the same blend of positive signs, uncertainty over the strength of the recovery and concern about how federal action will affect states.
Corina Eckl, NCSL's director of State Services, pointed to NCSL's latest "State Budget Update," which found "states continue to move along the same path of slow and steady growth that has gradually brought them out of the economic nadir. The general outlook of state officials is one of stability, with a dose of uncertainty."
Even with revenue projections meeting or exceeding expectations in most states, Eckl said, there was plenty of concern about the future.
Lawmakers in the room pointed to several areas of worry aside from the possible effects of the sequester. They included revenues from oil and gas production, which cut both ways depending on your state. In Oklahoma, severance taxes helped the state exceed its revenue projections, while Alaska reported its revenues dropping along with production. Others said that while personal income taxes collections were up in FY 2013, it could be a sign of trouble ahead since many people decided to take capital gains before the end of 2012 because of uncertainty over tax policy.
Another issue "is the 13 states that are failing to meet their sales tax forecast," Eckl said, pointing to that as one of the key concerns in the "State Budget Update."
Lawmakers do have some ways of pushing back against the federal cutbacks, Bird said, mainly by urging their their congressional delegations to back some key measures, such as the Marketplace Fairness Act, which the Senate will vote on Monday. That legislation would offer states some help by collecting up to $23 billion a year in collected revenue on online and other remote sales.
It won't solve all the fiscal woes states face, Bird said, but it's a start.