Virginia braces for the fallout from supercommittee budget failure

Virginia had better brace itself.  The Old Dominion and Maryland  stand to be disproportionally hit by financially by the fallout from the failure of the supercommittee to come up with a plan  to reduce the budget by 1.3 Trillion dollars.  Why are Virginia and Maryland targeted states? 

When the supercommittee failed to  come up with a compromise debt-reduction  plan, at the end of the given time  time period, the budget will go into a default of sorts.  Half of the automatic cuts will  be felt by defense and both Maryland and Virginia are where most of the nation’s defense contractors are.  The Washington Post reports:

In the malleable world of federal budgeting, members of Congress cast the breakdown as likely having little to no effect on federal spending over the coming year. The deadline for cuts, lawmakers on both sides of the aisle noted, is in 2013, and the two sides could agree before then to a new mix of cuts.

But in state capitals, where legislatures are bound by requirements to balance budgets, the committee’s failure cocked a trigger on $1.2 trillion in cuts that must, by law, be built into spending plans that governors will begin releasing within weeks.

Lawmakers in Annapolis and in Richmond began meeting in recent days to grapple with the potential effects: State budgets that are required to be approved next spring, and that will take effect in July, will overlap with the federal budget that is scheduled to contain the deep cuts. In Virginia, which budgets over a two-year cycle, the full effect of future cuts could be spread out and felt next summer.

What’s more, lawmakers in Maryland and Virginia say they fear preemptive action to slow or cancel contracts or reduce staff by the Department of Defense, which must account for more than half of the prospective cuts, will add an untold drag on the two states’ economies, holding back wages, employment and therefore state tax revenue to fund everything else.

“We’re an unusual state in that we certainly, no matter how you look at the numbers, we’re first, second or third as far as military funding,” said Virginia House Majority Leader Kirk Cox (R-Colonial Heights) . “If the automatic cuts go into place, they’re 50 percent defense. That certainly affects Virginia dramatically.”

The situation also prompted a heated reaction from Gov. Robert F. McDonnell (R) on Tuesday, after the committee gave up.

“We are mortgaging the future generations of this country by failing to realize we have to balance our budget and make ends meet,” McDonnell said in Richmond after a meeting with economic advisers. “We do it in Virginia and 48 other states do it as well. . . . The day of reckoning is here. The bill is due.”

It appears that  perhaps Gov. McDonnell’s bragging days on Fox News may be coming to an screeching halt.  Since taking office, McDonnell has made regular appearances on the conservative news network to champion his surplus balanced budget.  To date, Virginia has had an austere budget but has managed to come out on top and still attract business.  Virginia has also suffered lower unemployment than most other states, to date. 

Maryland and Virginia relyvery  heavily on federal employees and federal procurement contracts to bolster up  their states’ economies.  Many defense contractors operate in Virginia because of proximity to the nation’s capital.   Money lost could impact the following areas in Virginia:

Virginia officials say they have not tallied the potential losses, but by looking at individual programs, education could also take the biggest hit. 

The state estimates that it could lose $82.5 million in K-12 funding that supports such things as school lunch and breakfast programs and special education.

Virginia’s Department of Health and Human Resources faces potential cuts of $62.6 million, including $9.2 million in nutrition programs for women, infants and children and $2.5 million in Ryan White Act HIV/AIDS drugs and services.

Virginia’s Department of Social Services could see reductions of about $19.7 million, including about $8 million in a low-income home energy assistance program.

The Department for the Aging, which could lose about $3.7 million, estimates that 121,158 fewer meals could be delivered to the homes of elderly residents.

Who will get the blame now?  Will the sudden downturn in Virginia’s economy make politicians like Rep. Eric Cantor more willing to compromise?  Will he continue to sing the ‘reduce spending’ mantra or will he have a refrain or two in there about some tax increases on the very wealthy? 

The problem is, the money has to come from somewhere.  Where will the buck stop?  If Virginia cuts back on all the things listed above, who pays the bill?  It gets paid at the local level.  Prince William County must also have a balanced budget.  You cannot reduce spending but so much.  

We still have schools to run and social programs to finance.  Expect your property taxes to rise significantly.  Money doesn’t grow on trees.  The buck will stop right on your monthly escrow account.  The term ” pay me now or pay me later” will come driving home, perhaps a little sooner than we had previously thought. 

Reduce spending and other Tea Party banter will be a little harder to swallow when realty stops right on our doorstep.