States, Local Governments Face More Fiscal Uncertainty

Washington, DC – State and local governments, already trying to make ends meet because of dwindling revenue, increasing demands for services and growing budget deficits, are now facing even more red ink from some of the provisions of President Barack Obama’s proposed federal budget. While local and state budget deficits are not in the trillions like the federal government, in many cases even the smallest of federal revenue streams drying up can have significant impacts on their budgets. And the impact of those cuts can be far-reaching.

The president’s budget proposes a 1 percent reduction in the funding for employment and training programs administered by the U.S. Department of Labor. Education and training are key to ensuring an educated workforce, which helps draw business and industry to a community. Many local governments fear the loss of training dollars could result in fewer trained workers and the possible loss of some business and industry to other locations.

A reduction of $350 million in Community Development Block Grant funding is also part of the president’s proposed budget. Many communities depend on that funding for housing and wastewater projects, disaster recovery and programs that benefit low-to-moderate income families. Many fear loss of any funding from the program will take its toll of communities that cannot afford such projects on their own. Nationwide, cuts of $2.5 billion are proposed in the Low Income Home Energy Assistance Program. Local governments fear that families who need help the most will suffer as a result.

The cuts touch many programs that are important at the state and local level. Among the other proposed cuts of interest to state and local governments in the president’s budget proposal:

• Eliminating $160 million in water infrastructure earmarks;
• Eliminating $10 million in local government climate change grants; 
• A $947 million reduction in funding for State Revolving Funds that provides grants and low-interest loans for projects such as water or wastewater in local communities;
• A 50 percent decrease in funding for Community Services Block Grants that typically are made available to low-income families for childcare, employment, education, emergency services, health care, housing, nutrition, transportation, youth development, and coordination of resources and community participation;
• Consolidation of grant programs into three stakeholder categories and eliminate several programs in the Federal Emergency Management Agency (FEMA) that support state and local first responder activities;
• Reduces funding for new housing construction for seniors and persons with disabilities by $172 million relative to the 2010 enacted level;
• Reduces by nearly 60 percent the State Criminal Alien Assistance Program that provides federal funds for entities that incur certain costs related to incarcerating certain undocumented criminal aliens;
• Proposes reducing by 36 percent the Byrne Competitive Grants, which are used to curb violence against women, to fight Internet crimes against children, to improve the functioning of the criminal justice system, to assist victims of crime, and to support youth mentoring;
• Eliminates Byrne Discretionary Grants, which focus on crime and violence prevention and include education and training for criminal justice personnel;
• Eliminates the Southwest Border Prosecution Program, which provided $38 million in FY 2010 to four southwest border states;
• Reduces state and local anti-terrorism training to $2 million from $3 million in enacted FY 2010;
• Provides for a 25 percent reduction in the Job Corps construction budget;
• Reduces funds for airport construction to $2.4 billion, a reduction of $1.1 billion, by eliminating grants to large and medium hub airports; and
• Reduces spending for the Department of Veteran Affairs for construction projects by 38 percent.

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