SEQUESTRATION: THE LAST STRAW?Karen Kunz

West Virginia University

States are still grappling

with the effects of the

recession

The end of an ARRA:

The American Recovery & Reinvestment Act of 2009

Earmarks to States, 2000-2010

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010*$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

In $billions

* Estimate

The last straw?

Housing crash

Stock market crash

Earmark moratorium

End of ARRA

Continuing resolutions

And on top of all that…

SEQUESTRATION

The big picture• Infrastructure

• Community Development

• Pensions

From: the New America Foundation http://newamerica.net/publications/policy/the_infrastructure_deficit,

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$5,000

Infrastructure Community Development Environment

Decreases in earmarked funding by category, FY 2000-2009 (in $millions, adjusted for inflation)

Transportation funding

The Highway Trust Fund is not included in sequestration, however….

• general fund transfers resulting from MAP-21 cut by $471 million

• Transit program new start capital grants, supported from general fund revenue, cut by $156 million

• FHWA emergency relief funds cut $136 million (8.2%)

• TIGER grants reduced by $41 million.

Source: Associated General Contractors of America, http://news.agc.org/2012/09/25/sequestration-impacts-on-transportation-funding/

The current five-year [transit] capital needs in Northeastern Illinois alone are $10 billion, yet the recent Illinois Capital Bill provides only

$2.7 billion for the entire state

As critical as the condition of Illinois’ infrastructure is, it is

unlikely that the state will be able to allocate additional

resources to fix the problems in the foreseeable future. This

is because the growth in spending for pensions, Medicaid,

and debt service will out-pace the anticipated growth in

Illinois’ resources.

In Illinois

Community development

• CDBGs and other block grants

5% reduction in 2013, loss of $230 million

• Housing

loss of $404 million

10% loss of funds for homeless assistance

5% reduction in funds for public housing

Source: CBPP, http://www.cbpp.org/cms/?fa=view&id=3892

We’re living longer…

Yet state pensions are more underfunded than ever

• Public employee pensions underfunded $980 billion• On average, state pensions are only 48% funded, not the

70% estimate of many states

State and local government funding gap: $3,1 trillion• $2.3 billion in assets - $5.4 trillion in obligations = 3.1

trillion gap

The good news

There is one bright spot…

The Affordable Care Act