How Obama's Budget Affects the Region’s Bottom Line

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President Barack Obama delivering his 2013 budget address to students at Northern Virginia Community College.

First the public got the good news. President Barack Obama’s proposed 2013 budget released last Monday throws a life line to local governments with additional money to keep police on the streets and teachers in the classroom.

The fine print contained the bad news. With deficit reduction a top priority in Washington, D.C., President Obama is keeping his end of the deal made with House Republicans during the debt ceiling debate, identifying a trillion dollars in cuts to so-called discretionary domestic spending for the next ten years. As a result, his proposed budget does make substantial cuts to block grants and infrastructure programs, which many localities depend on to help shore up the social safety net and basic services.  If the cuts go ahead as projected it will result in a major downsizing of the flow of federal dollars to state and local governments.  Some of the proposed cuts include:

  • The Community Service Block grant program is facing $329 million in cuts — almost 50 percent of its last appropriation level. This program is a key resource for local governments trying to combat poverty and its community impacts. The cuts come as the number of Americans living in poverty rose to the highest level in the 52 years and the demand on state, county and local social welfare agencies that depend on this kind grant continues to rise. It is too early in the budget process to know how that cut will play out here, but it will make competition for those dollars much tighter.
  • The Low Income Energy Assistance Program. The president’s proposed budget cuts the program by $452 million, a 12 percent cut leaving around $3 billion dollars. Critics argue the cut will mean approximately one million struggling households will not be able to participate nationally.  In New York State 1.5 million households participate in the program. In New Jersey 300,000 households benefit from the program. State programs may be forced to raise the bar for eligibility or local revenue will have to be found to make up the difference.
  • Infrastructure. The president’s budget continues the trend of cutting back on federal support for big-ticket municipal projects like sewer and water treatment plants. The $359 million dollar cuts to the EPA’s Clean Water and Drinking Water State program will shrink the pool of money available to already financially strapped cities like Newark where Mayor Cory Booker said his city’s water system desperately needs a massive costly overhaul.
  • The National Oceanic and Atmospheric Administration Lab in Sandy Hook. Both New Jersey Senators Frank Lautenberg and Bob Menendez criticized Obama's plan to zero-out federal funding of the lab which has been in operation since 1961. Jeff Tittel with the Sierra Club said the cut was a major set back. “The Lab has done national recognized work on climate and ocean issue and its closing is blow to sound science and environmental protection.”
  • The budget also proposes cuts to the Army Corps of Engineers and the Environmental Protection Agency. Both the Army Corp and EPA play key roles in enforcing Federal environmental laws and standards on the ground.   Whether it is flooding or managing Superfund sites, both agencies are also crucial to local land use and permitting in the region. Critics argue that delays in Army Corps or EPA sign-offs could add costs to development projects or kill them entirely.  Both the Army Corp and EPA play key roles in enforcing Federal environmental laws and standards on the ground. How those cuts are reflected locally will now be the source of Congressional research and debate.

A spokesperson for the Bloomberg administration said they had yet to get a comprehensive briefing on the budget's impact for the city. But Bill Dressel, executive director with the New Jersey League of Municipalities said his preliminary assessment was that the total impact of the potential federal cuts would "be catastrophic for local governments" already reeling from the impact of slumping real estate values and hurting property tax revenues.

Chris Hoene, with the National League of Cities, said the infrastructure cuts come at the same time the federal government is raising the bar on water quality standards which force locals to make capital improvements the federal government won't help pay for.

“Years ago the federal government was a pretty active partner in capital investment in states, cities and counties across the country," Hoene said. "Today, they have largely moved out of the funding side of the equation and they are increasingly mostly active on the regulatory side."

The proposed budget wasn’t all bad news. Local officials from towns along the Passaic River did welcome the president's commitment to spend more than a million dollars on developing comprehensive mapping of their beleaguered flood plain. One congressional source said the president’s visit to Tropical Storm Irene ravaged Paterson made a lasting impression.   

The cuts in domestic discretionary spending envisioned as part of the deal on raising the debt ceiling don't take effect until January of 2013.