WASHINGTON – With the so-called fiscal cliff looming, and no deal yet struck between Republican and Democratic leaders in Washington, Oregon officials are faced with the possibility that a slew of federal spending cuts will go into effect on Jan. 1.
“If sequestration is the road that they go down, then I think the effects are fairly limited in Oregon,” said George Naughton, Gov. John Kitzhaber’s main budget advisor.
Sequestration is the term for $1.2 trillion in mandatory spending cuts over 10 years that were included as part of the deal to raise the debt ceiling in 2011. Half of the cuts must come from defense spending and half from discretionary domestic spending, with certain entitlements, like Social Security and Medicaid, exempt from the mandatory cuts.
The prospect of sequestration going into effect was intended to dismay both Republicans and Democrats, and result in it being replaced by a more acceptable debt reduction plan. But that has yet to happen.
Naughton recently asked state agencies to report how much their budgets would lose under sequestration, and concluded that three sectors would bear the brunt of the cuts: military spending, research grants and funding for economically disadvantaged and special education students.
For much of the state, the biggest impact would be felt in public schools.
Funding for Title I, which funnels aid to schools with disproportionately high numbers of poor students, would drop statewide by $11.2 million, from $146.7 million in 2012 to $135.5 million in 2013, according to Oregon Department of Education projections. The money available for state special education grants would decrease by almost $10 million, from $128.8 million to $118.9 million.
In Curry County, school officials said it is difficult to predict how districts would be affected.
“As it stands right now, I think it would be premature to plan on anything,” Brookings-Harbor School District Superintendent Brian Hodge said. “It depends on who you talk to, and what time of day what the story is. It is something that we’re watching very closely. Funding fluctuates almost every year; we’re constantly making adjustments. That’s part of the everyday operations of a school district.”
Central Curry School District Superintendent Jeff Davis echoed that statement.
“There are just so many unknowns right now, I don’t know what the reductions will be,” Davis said. “I haven’t received anything from the Department of Education yet. I think it’s probably a little premature.”
In Brookings-Harbor, any sort of funding reductions would hurt the entire district, Hodge said.
“Title I is schoolwide at K-School,” he said. “It’s not a specific target area. It would affect the whole school.
“As far as IDEA (Individuals with Disabilities Education Act) funds, special ed funds, it would affect the whole district. Until you knew what the dollar amount was and what it was being cut, it would be hard to say.”
Though Hodge was quick to add that all students would still receive all of services they need and that talk of layoffs would be very premature.
“I doubt that very seriously,” he said. “Worst case scenario would probably be cut days, but I don’t see that happening either. We’re doing OK.”
Davis is expecting a cut in funding for Title I programs and IDEA for special education.
“How much, I don’t know. What percent? I don’t know what that is, but I’m confident at the end of the day they’re (politicians in Washington) going to get it figured out,” he said.
“If (the fiscal cliff) happens, our funds are reduced obviously, we’ll have to make the cuts necessary to balance the budget. I’m not so concerned about this year as I would be for next school year. We’d be in a position this year to use any ending fund balance or cash carryover in reserve to finish up with the staff we have.
“I’m more concerned about next year. We’re in a position where we can’t cut any more staff. We’re so bare bones now. A special ed teacher at Riley Creek (Elementary School) has 31 kids on her caseload with one aide. I can’t imagine having one special ed teacher for the whole district. It would just be impossible to serve those kids.”
Timothy Duy, an economics professor at the University of Oregon, cautioned that focusing too much on spending cuts in a particular region might understate the consequences of sequestration going into effect.
If the overall economy slows as a result of higher taxes coupled with reduced government spending, then the Oregon economy is likely to follow suit, he said.
“It’s not so much about those specific targets, it’s about altering the course of the overall economy,” he said. “If the U.S. economy flips into a recession, then the Oregon economy flips into a recession.”
The Congressional Budget Office projects sequestration will plunge the nation’s economy into a recession in the first half of 2013, he said.