No holiday cheer for states in federal budget

WASHINGTON–The bare-bones spending bill now moving through Congress will do little to help states like Connecticut close their gaping budget holes.

That measure, which passed the House last week, freezes discretionary federal spending at 2010 levels through the end of fiscal year 2011. And it’s $46 billion less than President Barack Obama had been seeking from Congress.

“The main benefit for states is it removes any ambiguity and states can say, ‘Whatever we got last year is what we’ll get this year’,” said Marcia Howard, executive director of the Federal Funds Information for States, a nonpartisan research group.

“In this environment, the feeling is that getting out with no big cuts is pretty good,” she added.

Connecticut officials say they aren’t anticipating any holiday bonuses from Congress, even as Gov.-elect Dan Malloy makes a high-profile lobbying push in Washington on behalf of the state.

“I’m not expecting much,” said Ben Barnes, Malloy’s pick to head Connecticut’s budget office. “It’s a bleak time in Washington.”

The response to Malloy’s federal lobbying campaign so far, Barnes said, “has been they love us, but they don’t have any money.”

That message is not likely to change even after Congress finally passes a new funding bill for fiscal year 2011, which started Oct. 1.

Among other things, the House-passed bill would cut $1.5 billion from inner-city rail funds, trim $194 million from community policing grants, and leave low-income energy assistance flat. It does include increases for some key programs, but they’re small and limited.

Even as House leaders passed that legislation last week, they are working with the Senate on a competing spending measure could be slightly better news for Connecticut and other states. Instead of passing a flat funding bill reauthorizing federal programs at last year’s levels, top members of the House and Senate spending committees hope to push a more detailed spending bill–an omnibus budget–that would include earmarks, increases to key programs, and cuts to others.

The details of the omnibus proposal have not been released yet. But according to a congressional aide familiar with the closed-door negotiations, the omnibus spending measure would increase funding for key programs that states rely heavily on, such as education and transportation.

For example, the bill would fund Head Start, the federal early childhood education program, at $800 million over 2010 levels. The House bill would give Head Start only a $300 million boost.

In federal child care assistance that flows to the states, the omnibus bill would provide a $700 million increase over 2010, while the House bill would bump the program up by $374 million.

If the omnibus bill is a best-case scenario, the worst case is that Congress fails to agree on anything, save a short-term stop-gap bill that keeps the government running until the next Congress is sworn in, when Republicans will wield more power.

“The bigger fear for states is if they don’t get either one of these deals done and we move into the new Congress,” said Michael Bird, federal affairs counsel for the National Conference of State Legislatures. He noted that Republicans have pledged to reset federal spending at 2008 levels.

“That’s $100 billion, or a 10 percent cut across all discretionary programs-domestic and defense,” Bird said. “What if Connecticut were told in the middle of fiscal year 2011 by Congress, ‘You can rely on 10 percent less in federal funding for the current year?’.”

Clearly, such a scenario would wreak havoc in Hartford, where Malloy will already be grappling with a $3-billion-plus budget deficit.

Barnes said he had not examined all the various proposals floating around Capitol Hill yet, but he’s fully aware that once the GOP gains more strength in Congress, things will only get tougher in fiscal terms.

Some observers say the long-term House-passed funding bill, even with its smaller bottom line, would still provide one key opportunity for Malloy: more federal discretion.

The House bill gives federal agencies only general instructions to maintain current programs, with much more wiggle room than a detailed omnibus budget proposal that includes earmarks and policy prescriptions.

“There’s far more discretion,” Bird said. “It might open the door to some negotiations with various agencies, where the sitting governor or legislative leadership could say ‘We’d really like to make sure there’s funding for this program’.”

But, Bird added, “There’s also going to be an incredible amount of pressure. There’s a constituency for all those funding pockets, and everyone is going to be arguing, ‘I’ve got a program that’s absolutely essential.’ There will be very intense competition.”