Tue December 11, 2012
Kansas Faces Fiscal Cliff
Budget negotiations between President Obama and Congressional leaders continue, but if those talks fail, Kansas will see a series of funding cuts that will affect the future of higher education, research, and military bases in the state.
Overall, though, federal spending is likely to be level.
Congress and the President are facing a January 1st deadline to reach a deficit-reduction agreement. If they don’t come to terms, billions of dollars of automatic spending cuts and tax increases will be enacted. These are known as sequestration or as it’s been nicknamed by politicians, pundits, and the media the “fiscal cliff.”
The nation is facing this deadline because of moves made in the past to avoid the debt ceiling and delay decisions on how to deal with the federal deficit. Nationwide it would mean $400 billion in tax increases and about $100 billion in budget cuts.
Overall Federal Spending Will Hold Steady In Kansas
The Washington-based research organization, Federal Funds Information for States, estimates that in Kansas non-defense federal spending would drop by $61.8 million. That’s about a 7% cut in federal grants that are subject to the cuts. However, McClatchy is reporting overall federal spending in the state is likely steady because of the growth of entitlement programs such as Medicaid.
KU Could Suffer A Big Blow
The University of Kansas could face a double whammy under sequestration of higher student loan costs and less research money.
If no agreement is reached, federal agencies such as the Department of education, the National Science Foundaiton, and the National Institutes of Health would be required to cut research budgets by 8 percent.
The Lawrence Journal-World reports KU gets about $215 million in federal research funding--about 85 percent of the university's total research funding. KU could lose $18.1 million in federal research grants.
University officials say few things would change if sequestration lasted only for a few months, but if things went on longer, changes would be made. KU’s vice chancellor of research and graduate studies, Steve Warren, painted a grim picture in the Journal-World of what would happen if the cuts linger:
Research projects could slow or stop. Graduate students might lose assistantships that pay their tuition and provide them stipends to live on. Research assistants or others could lose their jobs. At the Medical Center, cancer patients who could have had access to clinical trials could be cut off.
"It would get really ugly and really sad, frankly," saidWarren.
Students would feel a direct hit too. Student loan costs would rise. The Journal-World reports origination costs would increase from 0.1 to 0.4 percentage points, depending on the type of the loan. The estimated total cost to all KU students is $27 million.
Kansans May Pay More For State Income Taxes
Several different taxes will be affected by the automatic measures. The 2001 and 2003 tax cuts as well the recent payroll tax cut are all set to expire.
State and federal tax codes are linked. In Kansas, the state tax code is linked to federal tax deductions. As those fall, overall state income tax revenue is expected to rise, according to a study by the Pew Center for the States.
However, the staff of Kansas Sam Brownback is not looking forward to more state tax revenue because the governor’s office believes lawmakers in Washington will reach an agreement.
NBAF May Face a Tougher Fight
The National Bio and Agro-Defense Facility will be a $1.15 billion animal disease research lab based in Manhattan, Kansas. The project has faced critics who’ve raised concerns over its size, scope, and risk to the state’s agriculture industry. The fiscal cliff is prompting questions about whether the nation can afford the lab.
Kansas House Minority Leader Paul Davis told the Journal-World:
"The environment for getting NBAF funded is getting more and more difficult,” said Kansas House Minority Leader Paul Davis, a Lawrence Democrat.
Part of that goes beyond the federal spending cuts. First District Representative Tim Huelskamp lost his positions on the House Budget and Agriculture Committee in what he called a vindication move for voting against Republican leadership on fiscal issues.
Other Kansas Republicans, including Representative Lynn Jenkins and Pat Roberts, have helped pick up the fight for the Department of Homeland Security project.