LOCAL ECONOMIC SNAPSHOT | SEQUESTER EFFECTS

Federal spending cuts come to Texas

By MITCHELL SCHNURMAN
Business columnist mschnurman@dallasnews.com

By TOM SETZER
Staff Artist tsetzer@dallasnews.com

The automatic spending cuts, which began March 1, call for $85 billion in federal cuts through this fiscal year and $1.2 trillion in reductions by 2021. While some lawmakers want to change the targets of the cuts, most believe the federal funding squeeze will stick. If so, Texas is vulnerable. Despite the many state politicians who criticize Washington and the tax burden, Texas depends on Uncle Sam a great deal.

How vulnerable?
Texas relies heavily on federal grants. Here are the states ranked on federal grants subject to sequester, as a percentage of state revenue (2010):

I Top third
WA 6.1% MT 7.5% OR 6.6% ID 7.2%

I Middle third

I Bottom third
VT 6% NH 6.8% ME 6.7%

ND 6.6%

MN 5%

WY 5.2%

SD 10.3% IA 5.3%

WI 5.5%

MI 6.7%

NY 6.6% PA 6.8%

NV 6.7% CA 6.1%

NE 7% UT 6.9% CO 7.3% KS 6% OK 6.3%

IL 8.5% MO 7.2%

IN 6.4%

OH 6.7% WV 6.7%

KY 6.8% TN 7.7%

VA 5.6% NC 6.3%

AZ 7.7%

NM 6.1%

AR 6.2% MS 7.6%

SC 6.9% GA 8.5%

MA 5.5% RI 7% CT 5.2% NJ 5.8% DE 4.8% MD 5.4% DC 5.9%

AL 7.5%

TX 8% AK 4.9%

LA 6.6% FL 7.2%

U.S. average: 6.6%

HI 5.4%

The most vulnerable states are shown with a dark border.

Racking up defense dollars

Texas was among the leaders in winning contracts from the Department of Defense in fiscal 2012:
(In billions of dollars) $50

The hit on Texas agencies

Texas is expected to lose nearly $335 million in funding for state programs by the end of the fiscal year. The biggest hits:
(In millions of dollars)
Texas Education Agency $168 $60 $34 $23 $12 $11 $9

$40.5
$40 $30 $20

$37.6 $32.2

State Health Services Texas Workforce Commission Assistive and Rehabilitative Services

$13.7
$10

$13.1

$13

Aging and Disability Services Housing & Community Affairs

California

Virginia

Texas

Maryland Missouri

Arizona

Public Safety

More cuts and exemptions

Some federal programs subject to sequester cuts are not included in the state budget, such as: I Research grants from National Institutes of Health and National Science Foundation I Head Start, Community Development Block Grants and Public Housing Capital Fund I Defense procurement, grants and civilian personnel Many categories are exempted from the sequester cuts, such as: I Medicaid, childrens health insurance, school lunches and food stamps I Certain programs for highways, transit and airports

SOURCES: The Pew Center on the States; USAspending.gov; Legislative Budget Board

The bottom line

If sequester cuts happen, they wont affect the factors and sectors that drive the Texas economy right now. Those are in-migration and population growth, professional services, tech, oil and gas, and construction. States are so intertwined with the federal government that they cant help but be affected. In Texas, one question is whether cuts will lead to furloughs at large defense manufacturers or military bases. Thats not clear yet. Will Texas even feel the sequester? The economy is strong enough to shrug it off, as it shrugged off cuts in state government in the last few years. But its tough on people hunting for jobs. The sequester gives companies another reason to pause. Mitchell Schnurman, columnist, The Dallas Morning News

Bruce Kellison, associate director, Bureau of Business Research, University of Texas at Austin

Anne Stauffer, project director, The Pew Charitable Trusts