By William Selway - Aug 1, 2011 2:31 PM PT
States braced for possible federal aid cuts under the congressional debt-ceiling deal intended to avert a U.S. default and government shutdown.
State officials are still parsing the debt-ceiling bill for details of how it will affect them. While it eliminates the immediate threat of a crisis that could impose higher borrowing costs and shut off the flow of federal funds, officials are concerned that the cuts will place added burdens on their budgets. This is the fourth straight fiscal year in which states faced budget deficits.
“A looming vote on the federal debt puts a dark cloud over Connecticut’s financial outlook,” the state’s comptroller, Kevin Lembo, said in an e-mailed statement. “Dollars that we depend on year after year could suddenly disappear if federal spending cutbacks result in drastic funding cuts.”
States received about 35 percent of the $1.62 trillion spent during the 2010 budget year from the federal government, according to the National Association of State Budget Officers. The money is used for programs such as Medicaid, public works projects, and public schools. The debt-ceiling agreement requires Congress to cut $2.4 trillion from the federal deficit, including more than $900 billion in the next decade.
http://www.bloomberg.com/news/2011-08-01/debt-ceiling-agreement-leaves-u-s-states-preparing-for-more-aid-reduction.html