KY Policy Blog

Budget Cuts Stack Up: Kentucky Faces the Eighth Largest Decrease in Federal Grants Among States

By Anna Baumann
June 19, 2013

Kentucky will receive $162 million less in federal grant funding in 2013 than it did in 2012, according to a new brief by the Economic Policy Institute (EPI). The report looks at the state-level impact of recent federal budget decisions and shows a 1.7 percent funding decrease in Kentucky, the eighth largest cut among the states.

The Budget Control Act of 2011 (BCA) cut more than $1 trillion from the federal budget by capping discretionary spending between 2012 and 2021. An additional $1.2 trillion in cuts ($85.4 billion in 2013) will happen through sequestration, the across-the-board budget cuts that are now starting to go into effect.

Sequestration was never meant to come to pass, but to serve as a motivation for Congress to reach consensus on more strategic deficit reduction. But in the absence of compromise, the across-the-board cuts began on March 1 and as it stands will persist until 2022.

For states, the BCA caps and sequestration have significantly cut federal grant funding in variety of ways. The sequester cuts Aging and Disability Services, Head Start, Housing and Rental Assistance, Unemployment Benefits, the Social Services Block Grant that helps pay for Kentucky’s Meals on Wheels program, the Childcare and Development Block Grant, the Mental Health Block Grant, and medical research among other programs.

Cuts are also being made to specific services that, although small, play an important role in Kentucky, including the following:

  • The WIC Farmers’ Market Nutrition Program provides $20 per WIC participant each summer to purchase fresh fruits and vegetables from farmers’ markets. In 2013, it will be cut by $52,000 in Kentucky, or 26.4 percent relative to 2012 funding.
  • Likewise, the Senior Farmers’ Market Nutrition Program will be cut by $40,000 in Kentucky or 12.5 percent.
  • The Juvenile Accountability Block Grant, which promotes accountability in the juvenile justice system, will be cut by $76,000 in Kentucky or 23.3 percent.
  • The Appalachian Regional Commission-Local Development Fund assists community and economic development in 13 Appalachian states. Kentucky’s program will be cut by 5.03% or $37,000 in 2013.

While most of the grants in EPI’s analysis saw a funding decrease in 2013, not all did. The Commodity Supplemental Food Program and some school lunch programs, for instance, received a boost. EPI accounts for these increases in their estimation of Kentucky’s $162 million net loss, as well as changes in funding levels to mandatory spending programs which are not attributable to the BCA. In many cases, the funding levels for those programs are determined by the number of eligible beneficiaries.

On top of the $162 million net loss to federal grants, Kentucky will also feel the effect of sequestration’s defense spending cuts. A majority of the state’s 8,756 affected civilian Defense Department employees are slated to be furloughed once a week for almost three months beginning July 8. The predicted net loss to Kentucky’s economy is $28.9 million.

In the public outcry over the sequester, some have called for more strategic apportionment of cuts to protect working-class Americans. Congress’s work to spare the Federal Aviation Administration and the relatively well-off Americans it serves has come under heavy criticism that current deficit-reduction strategies disproportionally burden low-income Americans1.

But in addition to being unfair, extreme deficit-reduction policies are unnecessary and harmful to the economy. Cuts under the BCA and others currently being proposed2 add up to “austerity,” which can further cripple a sluggish economy and hurt families already struggling to find a job and make ends meet. Besides, arguments supporting austerity are losing traction every day: the deficit has been cut, health care costs have slowed and there is no longer consensus that high debt causes slow growth.

Federal budget cuts come on top of13 rounds of state budget cuts and an unwillingness by the legislature to consider fixing the state’s revenue stream. Federal and state actions are shrinking public services when what we need is greater investment to spur faster growth.

  1. For example, both the House and Senate Farm Bills cut SNAP benefits, the House by a much larger margin which would eliminate food stamps for 2 million Americans. Analysis shows the program grew exactly as it should during the recession and is now scaling back, discrediting the claim that growth has been out of control.
  2. The House Appropriation Committee’s plan would override elements of the BCA to shift funds from domestic discretionary programs to defense and security. Even mandatory Medicare and Social Security are currently on the chopping block.

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