Although the clock was striking midnight, Congress and President Barack Obama did finally act on the fiscal cliff tax issue.
When it came to the spending side, however, they sidestepped the tough decisions and simply postponed addressing the automatic spending cuts, known as “sequestration,” for two months.
That may calm Washington nerves for the moment. But it creates big headaches for state governments and the nation’s defense industry, both of which are seeing their own spending plans seriously complicated by Washington’s failure to approve a clear budget.
Sequestration would have cut federal education grants to state governments by more than $1 billion and reduced total federal grants to the states by almost $100 billion.
Exactly what will happen in March, when Congress and the White House get around to debating spending matters, no one knows for sure.
Yet state leaders must start crafting their new budgets now. Scott Pattison, executive director of the National Association of State Budget Officers, says the uncertainty in Washington means that state budget leaders don’t have good answers to the questions, “What do we do? What number do we pick?”
Federal funds currently total around $2.6 billion annually for Nebraska. That’s about 29 percent of the state’s total budget.
Federal spending authority for fiscal 2013 expires on March 27. If leaders in Washington don’t rouse from their budget slumber by then, that will mean big headaches for a number of states — including Kentucky, South Dakota, Utah, Virginia and Wyoming — where legislative sessions are set to adjourn at the end of March, plus several other states (Idaho, Maryland and Mississippi) where lawmakers wrap up in early April.
Nebraska lawmakers aren’t in quite as tough a spot yet; this year’s legislative session will last until early June. In Iowa, the session ends in early May.
As for the defense industry, The Hill — a newspaper covering the federal government — reports that the ongoing delays “have created an uncertainty that’s terrible for business.”
A spokesman for defense contractor Pratt & Whitney told the Hartford Courant newspaper in Connecticut that the Washington budget stalemate was preventing the company from moving ahead on several fronts: “We continue to be cautious on decisions impacting hiring, capital investments and supply-chain orders.”
The point isn’t that the states and defense contractors should be shielded from federal spending cuts. However, they do deserve to know — as soon as possible — what cuts are coming so they can make thoughtful plans to deal with them.
Irresponsible governance in Washington not only sours Americans’ impression of our national leaders. It also does damage that rolls downhill to other governments and the private sector — needlessly.