Fiscal cliff’s impact in Kentucky uncertain but worrisome

McClatchy NewspapersDecember 17, 2012 


Soldiers salute during the National Anthem at Fort Campbell, Kentucky

CHARLES BERTRAM — Lexington Herald Leader/MCT

— Two weeks before the federal government is forced to make cuts that could impact classrooms, extension programs and staff, Kentucky State University’s Teferi Tsegaye notes that all he knows for sure about the so-called “fiscal cliff” is that his agricultural school is among those being shoved over.

“It would be devastating,” said Tsegaye, the dean of the university’s agricultural school. He’s worried because, he said, the school is funded half by the federal government, half by the state. If federal funding is whacked, state funding will follow suit, he said. “We don’t have any real information, but we know it’s going to have a dire affect.”

The historically black and land-grant university is hardly alone in worrying about the affects of the fiscal cliff, specifically the forced budget cuts known as sequestration. If Congress doesn’t reach a deal by Jan. 2, automatic cuts could cost Kentucky about $640 million in federal funding in 2013. The expected breakdown: about $122 million in federal spending on cops, crops and jobs training (including the cuts at Kentucky State) and about $520 million in defense spending.

Still, despite such staggering numbers, and even with the first cuts looming, discussions on the actual meaning of the forced cuts to a single state, such as Kentucky, or a single city such as Lexington break down into uncertain mumbles.

“Right now, we don’t know exactly how these tough cuts will translate to programs in Kentucky,” said Rep. Hal Rogers, a Kentucky Republican.

Rogers expressed hope that Congress could figure out a way to make the cuts “more fair and judicious” and not “across the board for all programs.”

The forced cuts would lop 10 percent off the top of the federal budget. As such it is seen as an inelegant tool, but an even-handed one. For overall defense spending, that means about a $62 billion reduction in funds. President Barack Obama has exempted military pay and benefits, which add up to $149 billion for 2013, from forced budget cuts. That’s from a total budget of about $614 billion, meaning the cuts are right around 10 percent.

But subtract the money for military salaries, and the budget exposed to cuts is really $464 billion. And the Pentagon has pledged to protect “the warfighter” in Afghanistan, meaning the actual budget exposed to cuts is closer to $400 billion, which looks like about 15 percent, though the Pentagon estimates it will be about 11 percent.

Confused? University of Kentucky economics professor Christopher Bollinger is.

“The hard part is that we don’t really know what it’s going to be,” he said. “In general, I think it’s probably not going to be as bad, not as sudden, as everyone seems to think. But ask me again in two weeks and I might have a different answer.”

Although the cuts are across the board, they likely won’t be shared equally in all parts of the country. States that receive a greater portion of their revenue from the federal government will feel the cuts more deeply. By that measure, a 2010 U.S. Census report indicates Kentucky might fare worse than many states, as it ranked seventh on a per capita federal spending list.

But even then, how deep the cuts will go isn’t clear. In 2010, the Pentagon spent about $13 billion in Kentucky. But the biggest single line item in that spending was military salaries, which are exempt. So experts think – but really aren’t sure – that areas with large numbers of civilian military employees and new military contracts could face the deepest cuts.

Which could mean the Blue Grass Army Depot and Bluegrass Station would feel sequestration deeper than Fort Campbell (both have about 3,500 civilian defense-related employees, but Fort Campbell has far more military personnel, who would not be cut).

This is why the Pentagon since the summer has been reminding Congress that sequestration will “hollow out the force.” The way these cuts will be applied, the U.S. military would retain its troops but would lose the money needed to fully equip, train and transport them.

Asked about the topic, Pentagon spokeswoman Lt. Col. Elizabeth Robbins said, “We are still hopeful that Congress will pass a balanced deficit-reduction plan . . . and sequestration is averted.”


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