Posts Tagged ‘federal spending’

Nevada Budget Likely To See Fewer Impacts From “Fiscal Cliff”

By Sean Whaley | 11:57 am November 20th, 2012

CARSON CITY – The impacts of the so-called “fiscal cliff” on Nevada’s state budget would likely be less significant than for many other states because of our lower dependence on federal spending, according to an analysis by the Pew Center on the States.

The impact on state tax revenues do not apply because Nevada does not have a personal or corporate income tax, according to the report The Impact of the Fiscal Cliff on the States. The report examines the potential effects on each of the states.

Analysis includes Nevada-specific numbers

On the federal spending cut side of the equation, Nevada’s share of federal grants subject to sequester, looked at as a percentage of state revenue, is slightly higher at 6.7 percent than the national average of 6.6 percent, and so could mean financial impacts.

But Nevada ranks well below the national average for federal spending on procurement, salaries and wages as a percentage of the state’s gross domestic product at 3 percent compared to the national average of 5.3 percent.

Nevada is also below the federal average for federal defense spending on procurement, salaries and wages as a percentage of the state GDP at 1.8 percent compared to the national average of 3.5 percent.

Federal non-defense spending on procurement, salaries and wages as a percentage of state GDP is 1.2 percent in Nevada compared to 1.8 percent nationally.

These numbers cited in the Pew report are all based on 2010 information.

And federal non-defense workforce as a percentage of total employment in the state is 0.9 percent in Nevada compared to 1 percent nationally, based on 2012 data.

But the Pew analysis notes: “The general economic slowdown that could result if the full fiscal cliff were allowed to take effect would likely overwhelm any of the separate impacts.”

Nevada officials are looking at the issue as one of several budget variables

The report, released Nov. 15, comes as Nevada Gov. Brian Sandoval is finalizing his 2013-15 state spending plan, which will take effect on July 1, 2013.

The impact of the federal fiscal cliff is just one more variable that could affect Nevada’s general fund budget. Another is expanding Medicaid to a new group of eligible state residents. Sandoval has not yet announced his decision on whether to support the expansion, which would be paid for nearly entirely with federal funds in the first few years.

“The Budget Division is currently evaluating the impacts of sequestration on federal funding to the state of Nevada,” said Director Jeff Mohlenkamp in a statement. “Specifically, we are researching reductions that would have direct impact on services to citizens. Some federal reductions may eliminate the resources to provide services but not eliminate requirements to maintain service levels. The potential for this type of unfunded mandate is of particular interest to the Budget Division as we prepare the budget for FY 2013 – 2015.

“There is a great deal of uncertainty surrounding other elements of the ‘fiscal cliff,’ ” he added. “ We understand the possible implications on the larger economy. At this point, we cannot speculate further as most of the critical decisions have not been made.”

The Pew study shows some states more dependent on federal spending

The Pew report on the fiscal cliff says that federal grants to the states constitute about one-third of total state revenues, and federal spending affects states’ economic activity and thus their amount of tax revenues.

Roughly 18 percent of federal grant dollars flowing to the states would be subject to the fiscal year 2013 across-the-board cuts under the sequester, according to the Federal Funds Information for States, including funding for education programs, nutrition for low-income women and children, public housing, and other programs.

Because states differ in the type and amount of federal grants they receive, their exposure to the grant cuts would vary. In all, the federal grants subject to sequester make up more than 10 percent of South Dakota’s revenue, compared with less than 5 percent of Delaware’s revenue.

Federal spending on defense accounts for more than 3.5 percent of the total gross domestic product (GDP) of the states, but there is wide variation across the states. Federal defense spending makes up almost 15 percent of Hawaii’s GDP, compared with just 1 percent of state GDP in Oregon.

The fiscal cliff, a series of expiring federal tax provisions and scheduled spending cuts, are set to take effect in January unless Congress reaches agreement on a deficit-reduction plan.

Scheduled tax changes account for roughly four-fifths – or $393 billion – of the total amount of the fiscal cliff. The scheduled spending cuts account for $98 billion – or about one-fifth – of the federal budget impact of the fiscal cliff. Over half of this amount is due to sequestration required under the Budget Control Act of 2011.

“To understand the full cost and benefits of proposals to address the fiscal cliff, policy makers need to know how federal and state policies are linked,” said Pew Project Director Anne Stauffer. “The implications for states should be part of the discussion so that problems are not simply shifted from one level of government to another.”

If the full force of the fiscal cliff is realized, the federal deficit would be reduced by $491 billion, the Pew Center analysis says. However, the Congressional Budget Office has projected that the entirety of the fiscal cliff would be a major driver of a general economic slowdown in 2013. Such an outcome would likely negate the more specific, separate impacts described in the analysis.

“Given the uncertainty about whether any or all of the policies in the fiscal cliff will be addressed temporarily or permanently, it is important to understand that the effects of the different components will vary across states,” Stauffer said.

 

Nevada Delegation Splits On House Speaker Plan To Reduce Federal Spending, Raise Debt Ceiling

By Sean Whaley | 6:41 pm July 28th, 2011

CARSON CITY – Rep. Joe Heck, R-Nev., announced today he will back a spending reduction plan put forth by House Speaker John Boehner because it proposes a balanced budget amendment that will protect the United States’ AAA credit rating.

A vote on the plan scheduled for today was delayed, however.

Senate Majority Leader Harry Reid has said the plan is “dead on arrival” in the U.S. Senate if it passes the House.

Rep. Shelley Berkley, D-Nev., opposes the Boehner plan. Nevada’s third congressional district is currently vacant.

In announcing his support for Boehner’s plan to cut federal spending and raise the debt ceiling by an Aug. 2 deadline, Heck said: “Default is not the real problem – the real problem is the potential for a downgrade to the United States’ AAA credit rating. What would it mean to Nevadans if the United States lost its AAA credit rating? If the United States loses its AAA credit rating, interest rates will rise on everyday items such as credit cards, car loans, student loans, small business loans and mortgages.”

In a conference call with reporters today, Heck said: “And I have full faith in the speaker’s leadership and I think that given the hand that he was dealt, with the constant to and fro with the White House, that he has got a plan on the table that accomplishes the necessary goals to prevent a downgrading of our credit report.”

Rep. Joe Heck, R-Nev. / Nevada News Bureau file photo

Boehner’s plan only calls for a vote in the House and Senate on a balanced budget amendment.

Heck said the actual spending reduction in the plan is only a first step. The real solution to reducing federal spending is a balanced budget amendment.

“I think the House plan is an excellent down payment,” he said. “It’s by no means the final payoff. And I think the way we eventually fix this issue is to pass the balanced budget amendment and have it ratified by the states.”

Rep. Shelley Berkley, D-Nev. / Nevada News Bureau file photo

Berkley told the Las Vegas Review-Journal she did not like the two-step process to raise the debt ceiling because it would require another round of debate a few months down the road.

Audio clips:

Rep. Joe Heck says Boehner’s plan will prevent a credit downgrade:

072811Heck1 :20 our credit report.”

Heck says the long-term solution is a balanced budget amendment ratified by the states:

072811Heck2 :16 by the states.”

Cato Institute Senior Fellow Says Federal Government Spending Must Be Cut To Sustainable Levels

By Sean Whaley | 3:18 pm July 26th, 2011

CARSON CITY – A senior fellow with the Cato Institute said today the partisan fight over reducing federal spending is really between one class of people who work, produce, save money and pay taxes and a second group that lives off of the first group.

“This whole political clash between the Republicans and Democrats is really a clash in the electorate,” said Gerald O’Driscoll, a senior fellow with the Cato Institute. “And the first group wants to stop paying as much taxes; certainly does not want to pay the taxes that are implied by the debt that has been racked up in order to pay off on promises to the second group that can’t be fulfilled.

“This is reality coming home and that’s ultimately what underlies this great political debate,” he said.

O’Driscoll, who lives in Reno, was interviewed on the Nevada NewsMakers television program.

Gerald O'Driscoll, senior fellow with the Cato Institute

The demand to cut federal spending has been linked by Republicans to raising the debt ceiling. The deadline for Congress to act on raising the debt ceiling is one week away, with Republicans and Democrats apparently still far away from any kind of agreement on how to cut spending.

O’Driscoll said federal government spending is at unsustainable levels right now.

“As recently as the Clinton Administration, government expenditures were 18.2 percent of total output of goods and services, GDP,” he said. “And they were 20 percent, a little under 20 percent, going into this downturn. Now they are 25 percent. That is more than the economy can pay.”

O’Driscoll said the federal income tax and other associated tax revenues produce about 19 percent of GDP on average, so the government can’t afford to spend 25 percent.

“That is unsustainable,” he said. “That is a big cutback that has to occur.”

The Cato Institute is a public policy research organization that describes itself as being “dedicated to the principles of individual liberty, limited government, free markets and peace. Its scholars and analysts conduct independent, nonpartisan research on a wide range of policy issues.”

Audio clips:

Gerald O’Driscoll, a senior fellow with the Cato Institute, says the debate over the debt ceiling and federal spending is really about those who pay taxes and those who consume them:

072611Odriscoll1 :30 can’t be fulfilled.”

O’Driscoll says the reality of federal spending levels is pushing the debate:

072611Odriscoll2 :06 great political debate.”

O’Driscoll says current federal spending is unsustainable:

072611Odriscoll3 :20 economy can pay.”