Remember the government shutdown and sequester in 2013? The federal government cut spending to states, including Nebraska – but government officials had no idea where the cuts were exactly going to take place or for how long. What if Nebraska was prepared for the next time Washington cuts federal funding?
That is what the Platte Institute will be testifying on this week. Legislative Bill 611 would create an agency-by-agency inventory of all federal funds the state receives, and the strings attached to those dollars.
Why is this important?
Let’s take a look at Nebraska’s budget, which is made up of eight different funds, totaling $12.2 billion. The General Fund gets the most attention, which is funded by state tax dollars and is the main fund for government operations, at about $4.2 billion. Other funds include the cash reserve fund, cash funds, construction funds, federal funds, revolving funds, trust funds, and distributive funds.
For the fiscal year ending June 30, 2016, Nebraska budgeted $3.7 billion in federal grants, which is a 17 percent increase in inflation-adjusted dollars over the last 10 years. In addition to 30 percent of the state’s overall budget consisting of federal grants, the federal government also ties Nebraska’s purse strings with unfunded mandates across multiple agencies and departments.
Reliance on federal aid can cause lasting problems for state budgets and lawmakers. Federal funding incentives often cause the state to engage in programs or projects it might otherwise choose to avoid. After years of reliance on federal aid, many in state government have found that federal edicts drive up the cost of government services. Even contractors who work with state agencies are vulnerable to these onerous federal requirements, which often increase the cost of their work to the state.
An inventory of these funds is absolutely necessary. Today, Nebraska officials simply do not know the impact of future federal funding cuts. What we do know is that Washington will not cut funds with Nebraska’s best interest in mind; across-the-board cuts will impact everyone. LB611’s federal funding inventory will provide a risk assessment so that state and local officials can make smart decisions in the event of federal spending cuts.
Imagine this year, amidst our current budget shortfall, that the next recession hits and the federal government enacts another sequestration. Many Nebraskans would be left without services and jobs they have come to depend on. The only way to ensure the state’s spending is prioritized to those who really need it is to know where all the money is going, and that includes federal grants.
States, including Nebraska, have become increasingly submissive to an overbearing national government. From light bulbs, to ceiling fans, to the state highways you drive on, to an elementary school student’s educational standards, to your health insurance, the federal government has enacted regulations to keep a steady hand over seemingly every minute detail of our lives.
According to the most recent Nebraska Annual Budgetary Report, the state has received an average 31 percent of its total budget from the federal government over the last ten years, with the exception of 2010 and 2011, when the American Recovery and Reinvestment Act (the so-called "stimulus") helped to boost federal funding to 35 percent of the state's total budget. This federal overreach increases the cost of goods and puts faceless regulators in charge of spending Nebraska’s tax dollars on their priorities instead of our own.
Every state in the nation relies on the federal government for some portion of its budget, and Nebraska is no exception. But Nebraska is too vulnerable to decisions that are made in Washington, whether it's due to sequester, shutdown, or unsustainable spending. Nebraska needs to reduce its dependence on these funds and develop a plan to operate when—not if—this funding goes away.
LB611’s federal funding inventory will help policymakers see the federal funds and strings attached, measure the impact of the coming spending crisis, and act in the best interest of Nebraskans.
Sarah Curry is the Policy Director of the Platte Institute.