Lack of U.S. debt deal could soon hit N.C.

In 2013, automatic cuts could slice into universities, schools and the military.

Washington CorrespondentJanuary 9, 2012 

  • If federal deficit-reduction cuts take effect, exemptions would include pay for active-duty military personnel, veterans' benefits, highway funds, Social Security, Medicare and Medicaid benefits and welfare payments. But a range of other defense and non-defense programs would be affected. Here are some of the estimated funding losses for North Carolina in 2013, the first year of the mandated cuts:

    Defense contractors

    $351 million

    Medicare providers/doctors, hospitals

    $333 million

    K-12 Title 1 funds for poor schools

    $40 million

    K-12 special-education programs

    $35 million

    Public housing

    $27 million

    Supplemental food program (WIC)

    $20 million

    Head Start

    $16 million

    Low-income home energy assistance

    $12 million

    Sources: U.S. Census Bureau; National Governors Association; Federal Funds Information for States; N.C. State Officials, Center on Budget and Policy Priorities; Congressional Budget Office

— The failure of Congress to slash the national deficit threatens to cascade from Washington straight into North Carolina's schools, stores and doctor's offices.

Automatic spending cuts - triggered by the lack of agreement in Congress over ways to reduce the more than $1.2 trillion deficit - will begin in 2013 and could mean:

An estimated 9 percent cut in the $417 million that Duke University gets from the National Institute of Health to research cures for diseases such as cancer and Alzheimer's, alternative energy and national security.

The loss of federal funds for public schools with large populations of low-income students. In Cabarrus County, for example, that means the school system could lose money that pays for a series of federal programs, including $210,000 in Title 1 funding, which helps low-income schools hire teachers and assistants to reduce class sizes, improve computer labs, purchase supplies, and increase teacher training.

And the death of mom-and-pop shops in military towns like Fayetteville that could lose $351 million in defense contracts and tens of millions in civilian payroll.

"It's a huge concern," said Ramon Reyes, who owns Da Bootshop, a shoe and boot repair store outside Fort Bragg's gates.

The army base, which supports more than 60,000 soldiers and airmen, 14,000 civilians, and 5,400 contract employees, injects nearly $11 billion into the local economy.

Seventy-five percent of Da Bootshop's business comes from military personnel and their families. Reyes said he's already fighting to stay open because of the bad economy, extended deployments, and damage from Hurricane Irene. Cutting defense contracts at Fort Bragg by even a small margin, he said, could be the breaking point for his business and others nearby.

"It's actually like taking a meal off the table for small businesses," he said. "I've lost any and all confidence in the government and the system. They're too busy fighting against each other. They don't realize they're playing games with people's lives and people's livelihoods."

Debt deal still possible?

A congressional super committee was tasked with reducing more than $1.2 trillion from the federal deficit. They walked away from the effort in November after members couldn't agree on how to do it.

The lack of an agreement triggered the Congress-mandated "sequestration" cuts, which once they begin in 2013 will continue through 2021.

Lawmakers, such as U.S. Sen. Kay Hagan, D-N.C., are quick to note that sequestration has yet to go into effect and that its a priority to find a bipartisan solution to avert the process.

"Just because the super committee couldn't come to an agreement, doesn't mean that we stop trying to find other ways to reduce our sky-high deficits," Hagan said. "...We all know that the challenges before us demand bipartisan cooperation."

That hasn't stopped concerns from growing as state and federal officials try to make sense of the magnitude of losing so much federal aid.

It would be severe.

North Carolina receives billions in federal funding each year. The exact amount that will be slashed in 2013 probably won't be known for months, but economic analysts with the Congressional Budget Office and National Governor's Association have recommended states estimate between a 7.8 percent and 8.8 percent cut of nonexempt programs.

"You have to believe that there are going to be real consequences," said Richard Kogan, a senior fellow with the Center on Budget and Policy Priorities, which estimates a 9.3 percent cut to most affected defense programs and 9.1 percent cut to non-defense programs in 2013.

Some of the most vulnerable programs are those designed to assist poor and low-income families. They include Head Start, special education grants, child welfare services, public housing grants. Exempt programs include Social Security, Medicaid, active duty military personnel and highway funds. Payments to Medicare providers would be reduced 2 percent.

N.C. Gov. Bev Perdue was unavailable for comment. Press secretary Chris Mackey described the failure of the congressional super committee as yet another example of Washington's inability to come up with solutions that have serious impacts on North Carolina children, military bases and the local economy.

"If this isn't remedied, North Carolina and the rest of the states, who every year have to balance our own budgets, suffer the consequences," Mackey said.

Cuts could be severe

Officials in the state who work with federal grants say they're struggling to answer questions from parents, students and teachers about how the $1.2 trillion in federal cuts could actually affect their programs.

Christopher Simmons, associate vice president of federal relations for Duke University, has heard from professors, students, and even congressional staffers.

"There is no way to predict what the trickle down impact will be on a professors' laboratory or students' pocketbook right now," he said. "The best thing we can do is plan for the worse and hope for the best."

Marion Bish, director of federal programs at Cabarrus County Schools, said all 29,000 students in the district would be affected. More than 40 percent of the county's students receive free and reduced lunches.

The system could lose funding for several programs, including Head Start, special education, and state testing. Bish is particularly concerned about the 5,500 students at the district's 10 Title 1 schools.

Not only would teachers be lost, she said, but some schools could lose their Title 1 funding entirely.

"It creates some real difficult questions," she said. "Either way we go, we're going to give up and lose things that are currently in place for children."

$1 trillion from military

U.S. Rep. Mike McIntyre, a Democrat from Lumberton who is on the House Armed Services Committee, is particularly worried about military cuts. The $500 billion in defense spending cuts would be keenly felt in North Carolina, which has a large military footprint. The state has the third-largest number of active service men in the country. While pay for active-duty military is exempt, weapons programs, training, and civilian employees could be cut.

Defense Secretary Leon E. Panetta told Congress that Pentagon is already planning $450 billion in cuts in the next decade. He said the additional cuts, which would amount to about $1 trillion, would tear "a seam in the nation's defense" and lead to the smallest ground force since 1940.

Fort Bragg, Camp Lejeune and other bases in the state could see pay freezes or even layoffs for some of their 20,000-plus civilian employees.

McIntyre said the last thing the government needs is to cut funds for vital programs that help men and women in military.

"I am extremely concerned, for example, about the potential elimination of the F-35 Joint Strike Fighter and the reduction in the size of our ground troops to pre-World War II levels," he said.

The controversial F-35 program is a prime target for absorbing a chunk of the more than $500 billion in required defense cuts. At $385 billion, the Pentagon's most expensive weapon's system has been plagued with production delays and cost overruns.

James Rosen of McClatchy Newspapers contributed.

Ordoñez: 202-383-0010 and fordonez@mcclatchydc.com

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