Rhode Island’s state budget is already feeling the squeeze now that federal stimulus money has dried up. But this week’s debt-ceiling deal promises more pain down the road.
Federal dollars will pay for about 34% of Rhode Island’s $7.7 billion budget this fiscal year, which started July 1. That’s about the same as in most other states, where federal revenue accounts for about $1 out of every $3.
This week’s agreement calls for more than $2 trillion in federal budget cuts over the next 10 years. Those cuts will either be made by a congressional “super-committee” or forced through automatically if that panel fails to come to an agreement by the fall. Congress must vote on the panel’s ideas by Dec. 23. If those cuts take effect immediately, they could throw a monkey wrench into Rhode Island’s budget halfway through the fiscal year.
The New York Times reports that figuring out how states and local governments will be affected is “a frustrating task given the fact that many of the details of the reductions in federal spending will not be known until later in the year.” But the paper says there is “no doubt” they are “facing even more tough times ahead.”
The Washington Post agrees, saying “steep cuts will be unavoidable” and that they are “sure to compound the dire fiscal situation confronting the states.”
Medicaid, the state-federal health insurance program for the poor, is exempt from the automatic-cuts trigger, but it could still come under the knife if the super-committee targets it. The Post thinks transportation and infrastructure spending could also be reduced. And as Stateline notes, there are a host of smaller programs that send federal dollars our way, too.
The impact won’t be limited to governments, either. The debt deal calls for cuts in Medicare payments to providers – doctors and hospitals – which will squeeze Rhode Island’s sizable health sector. Grad students will start accruing interest on their federally subsidized loans while they’re in school instead of after, and on-time repayment bonuses will be phased out for all student loans, USA Today reports.
Update: I forgot another obvious way the deal could affect Rhode Island – big cuts to the defense budget.
The automatic trigger would slice $600 billion from the Pentagon budget halfway through this year. (That’s on top of the roughly $400 billion in cuts military is already planning over the next decade.) That could mean layoffs at Naval Station Newport or a loss of business for the state’s Aquidneck-centered defense sector.