After narrowly avoiding the dreaded “fiscal cliff,” which would have would have slashed about $656 million in grant funds to Texas, according to The Dallas Morning News, another potential crisis looms: sequestration.
Sequestration is the term for a series of mandatory budget cuts to federal programs, totaling $1.2 trillion in the U.S. over 10 years, that would go into effect March 1 if Congress doesn't find a way to trim that same amount with a deficit reduction bill.
Sequestration stems from the Budget Control Act, passed in 2011 by Congress. It was a mechanism designed to force the Joint Committee on Deficit Reduction to reach a compromise on long-term debt reduction plans. When the committee failed to reach a deal, sequestration was triggered. Originally sequestration was set to begin on Jan. 1, but it was pushed back to March 1 as part of the fiscal cliff deal President Obama signed into law in January. The deal avoided economists' predictions of an economic recession and a 9 percent unemployment rate, according to CNN.
According to a Pew Report, federal spending represents 5.4 percent of the Texas economy. If sequestration were to happen, Texas would suffer from massive cuts to many federally funded programs the state depends on to serve Texans in the areas of health, education and defense.
At least one lawmaker appears worried about potential negative effects of sequestration on the state. State Rep. James White, R-Hillister, has filed House Bill 568, which would require Texas to study the effects of cutting financial ties with the federal government.
The “Texas Self-Sufficiency Act” would create a special committee to study "a possible reduction in or elimination of federal funding" on the state budget.
House Speaker Joe Straus, R-San Antonio, in November 2012 created a specific committee to study the effects of sequestration on the defense industry in Texas, the state budget, public and higher education and taxes. The Interim Committee on Texas Response to Federal Sequestration, led by state Rep. Linda Harper-Brown, R-Irving, found in its report that “institutions of higher education, Head Start and defense entities would be particularly adversely affected.”
Public education would see the largest estimated reduction, at $517.6 million, according to the committee's report. The Texas Education Agency testified that 120 of its 130 federally funded programs would be subject to sequestration. Austin ISD stated in the committee's report that it would lose as much as $4.8 million in federal grant funding, resulting in job losses and a significantly diminished ability to provide services to disabled children.
The interim committee found that higher education would suffer in the areas of research and financial aid funding. The University of Texas System predicted that sequestration cuts would result in financial aid program cuts totaling up to $1.4 million annually.
Services that subsidize child care for low-income families would also suffer under sequestration. The committee estimated that the Texas Workforce Commission's Child Care Services would see a $20 million reduction. Head Start, a similar subsidized child care service, would lose 1,463 Texas jobs, and some 7,022 parents would lose jobs because of a lack of child care.
The report found that Texas would be in the top three states to lose jobs. Another major source of job losses would come from cuts to the Department of Defense, which would leave the Texas defense industry vulnerable.
Sequestration would not affect major programs like Medicaid, food stamps and the Children’s Health Insurance Program.
Bottom line: Sequestration could mean the loss of thousands of Texas jobs, particularly in the areas of education, health and human services, and defense. But some major programs would not be affected.
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This article originally appeared in The Texas Tribune at http://www.texastribune.org/2013/02/12/texplainer-how-could-sequestration-affect-texas/.