Federal Aid to States Rising Despite Sequester

March 12, 2013

Every speech I give, every panel I’m on, every trends piece I write nowadays includes my prediction that federal aid to the states will drop in future decades. Many people—including many state legislators—are astonished to learn that states rely on federal aid for about one-third of their budgets. (See state-by-state here.) As the feds start looking around for deficit reduction opportunities, I see aid to the states as easily on the chopping block. I try not to run from my past failed predictions, so we’ll all see if I’m right or wrong in a few years.

However, this remains a prediction about the future, as evidenced by new information put out (PDF) by Federal Funds Information for States (FFIS) and forwarded by the National Conference of State Legislatures (NCSL).

FFIS estimates that pre-sequester, federal aid to states in Fiscal Year 2013 would have totaled $607.2 billion, a 2.5 percent increase over the $592.3 billion in 2012. The March sequester “cuts,” fully in effect, would pare that back to $601.2 billion, a 1.5 percent increase over 2012. So it’s not so much “cuts” as a less generous increase.*

Table: Federal Aid to States

Year

Amount

Change from 2012

FY 2012 Actual

$592,306,548,000

FY 2013 Estimated (pre-sequester)

$607,252,257,000

+2.5%

FY 2013 Estimated (post-sequester)

$601,166,608,000

+1.5%

Note: Includes both March 1 sequester (reductions due to the “Supercommittee’s” failure to achieve $1.2 trillion in deficit reduction) and the March 27 sequester (reductions due to Congress exceeding FY 2013 spending caps).

Source: FFIS; NCSL.

Apparently NCSL’s executive director didn’t get the memo, as he penned an op-ed today decrying the sequester cuts and calling for higher state taxes “to help ease the burden.” I'm not sure whose burden he's talking about.

*Note: Nine states actually will see a drop in federal aid due to the sequester, primarily because their increase over 2012 had been planned to be so low and the sequester pushes it negative: Illinois, Kentucky, Minnesota, New Mexico, North Dakota, South Carolina, South Dakota, Washington, and Wyoming, as well as the District of Columbia, Guam, the Northern Mariana Islands, and the Virgin Islands. Six states were seeing a cut in federal funds anyway: Connecticut, Indiana, Louisiana, Maine, Massachusetts, and Missouri, as well as American Samoa.


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