Economic Snapshot

Cutting federal funding hurts state and local budgets and economies

State budgets rely heavily on federal funding— in 2011, federal grants to state and local governments totaled $607 billion. The sequestration cuts that went into effect on March 1 are a prime example of the impact federal fiscal policy decisions can have on state and local budgets, as well as their overall economies. Sequestration cuts $85 billion from government spending for the rest of fiscal 2013. As this recent EPI paper details, this means a $5.1 billion reduction in federal funding for state grants, relative to federal funding levels that were in place when sequestration went into effect. Because states use these grants to fund vital services such as infrastructure improvements, education, social services and public safety efforts, these cuts will not only hurt state economies but will also mean real losses for working families across the country.

The March 1 sequestration resulted in all 50 states and the District of Columbia losing varying amounts of federal grant funding, ranging from a 3.36 percent cut for Wyoming to a 0.68 percent cut for Tennessee. Many programs were subject to sequestration cuts. A few examples of programs that saw their grant funding cut under sequestration include Title 1 education programs, Head Start, and the WIC Supplemental Feeding Program. For context, two of the most populous states (with presumably large programs), California and Texas, experienced the following losses in grant funding due to sequestration: $28.2 million for the Texas Head Start program, $58.2 million for the California WIC supplemental feeding program, and $83.3 million for California Title 1 funding for local education agencies.

See more work by Rebecca Thiess