(AP) — The last-minute debt deal approved by Congress and President Barack
Obama keeps federal aid flowing to states. But Indiana won’t emerge
unscathed from the battle despite its own efforts to get its fiscal house in
The federal deal
calls for lawmakers to cut $917 billion. It spares the largest chunk of
federal spending — entitlement programs like Medicaid and Social Security —
but targets “discretionary funding,” which is where a good chunk of the
roughly $9 billion the state collects from the federal government each year
and education could be sitting ducks. So could labor, child welfare and
environmental aid. And Indiana, which has already weathered millions in
state-ordered cuts, will have to make some tough choices.
“A question for
states is what are their priorities going ahead?” said Michael Bird, senior
federal counsel for the National Conference of State Legislatures. “What are
the things you need to invest in to, one, turn the economy around, and two,
fortify. You can’t move forward with everything.”
has rebuilt its reserves to nearly $1.2 billion, the state leans heavily on
federal money. Close to $1 billion of the state’s $1.7 billion in
transportation money comes from the federal government. Indiana relied on
stimulus dollars to help patch the budget through the Great Recession. The
state also borrowed $2 billion from the Obama administration to pay for
unemployment insurance — a loan for which state lawmakers approved a
repayment plan earlier this year.
“It’s been a
very popular talking point to be critical of Washington and be critical of
federal spending, but I don’t think people know what an integral role that
federal funding plays in our state budget and in terms of our local
budgets,” said Sen. John Broden, D-South Bend, a member of the Senate
According to a
comprehensive federal report that tracks federal aid to the states, Indiana
collected $10 billion in the 2009 fiscal year, the most recent data
Department of Education sent Hoosiers more than $300 million for special
education programs and another $1 billion for secondary education that year.
of Homeland Security sent Indiana $300 million that year — most of it to pay
for anti-terrorism programs and disaster relief. The Department of Housing
and Urban Development sent the state another $613 million — most of it
housing aid for low-income Hoosiers.
“I don’t see the
state stepping in to replace those funding streams unless we have some
specific crisis that we need to deal with,” said Senate Appropriations
Committee Chairman Luke Kenley, R-Noblesville.
The cuts will
not come en masse until Obama introduces his next budget. And still to be
decided is at least $1.8 trillion in potential budget cuts or tax increases.
A committee of a dozen lawmakers is scheduled to make its recommendation to
Congress by the end of the year.
“super committee” could easily approve cuts in the other half of Indiana’s
federal purse: $4.3 billion for Medicaid.
director Adam Horst won’t speculate on what would happen if the state loses
any portion of its federal aid. When faced with the prospect of the U.S.
default two weeks ago, Horst said the state would be able to subsist on the
state’s $1.2 billion cash reserves and lean on money gained from the 75-year
lease of the Indiana Toll Road for a short period.
For now, Indiana
can only wait to see how federal lawmakers tackle what Daniels calls the
“red menace” of federal spending.
the answer to how much and when or what,” Kenley said.