Fiscal cliff could have local effect
Sunday, December 16, 2012
Looming less than three weeks away could be big changes to the country's financial situation, from households and small businesses to government entities that provide services to millions. In Southeast Missouri, schools could see reductions in federally funded services for students. Local governments are also bracing for another dip in sales tax revenue after the books finally began to even out as the recession wanes.
The "fiscal cliff" describes what will happen in 2013 if Congress doesn't reach a deal to prevent major federal spending cuts and tax increases, and could have some definite consequences at the local level.
Most recent estimates show Missouri could face losing up to $125 million from the federal government, some of which goes toward funding services for low-income students in public schools.
That could mean a $100,000 reduction in Title I funds for the Cape Girardeau School District. Title I is a federal designation given to a school that typically has 40 percent or more of its students coming from families qualifying under the U.S. Census Bureau's definition of low income. Title I funds pay for supplemental learning programs, some staff salaries and benefits, and other programs and services in several of the district's schools.
Superintendent Jim Welker said if sequestration of the federal funding happens, the district may have to look at cutting services if the money can't be replaced with district funds. The uncertainty with the budget comes at a time when the district is trying to make improvements and add services in several areas. In the past year, and in years ahead, district officials have been attempting to raise salaries for teachers and staff to stay competitive with other districts. Work on an initiative to provide computers for all students also is underway while the district looks for funding. Welker said the district would "certainly look at any and all options" before making any decisions to cut services.
Throughout the state, funding for special education, early childhood programs and food subsidies for women and children also could see cuts.
Temporary payroll tax cuts also are set to expire if a deal is not reached. Local government officials fear that with more going to taxes, consumers will be spending less, thus adversely affecting sales tax revenue.
"I am desperately concerned, especially about sales tax," said Cape Girardeau County Auditor Pete Frazier.
The county has battled flat or falling sales-tax revenue since 2009, pushing its unencumbered balance lower each year. Projected unspent funds the county will have in fiscal year 2013 out of a proposed nearly $11.5 million budget will be $28,470, down from around $395,000 in 2010.
Ending payroll tax cuts put into place in 2011 will result in a 2 percent tax increase for workers, the end of certain tax breaks for businesses, shifts in the alternative minimum tax and the end of tax cuts passed under the George W. Bush administration, and the beginning of taxes related to President Barack Obama's health care law.
The idea that higher taxes could mean less spending, and therefore less sales tax revenue, Frazier said, would put pressure on a county budget that also has faced less revenue collected from court fees and housing inmates. The county expects to lose about $250,000 in other revenue as a result of local governments no longer being allowed to levy sales tax on out-of-state and person-to-person vehicle sales. That change came as the result of a Missouri Supreme Court ruling earlier this year.
"This is probably all going to hurt us if it happens," Frazier said.
The county could otherwise be affected if federal funds to improve, maintain and repair roads and bridges are cut.
Missouri's members of Congress, including Sen. Roy Blunt and Rep. Jo Ann Emerson, recently have addressed federal spending plans in the works.
Earlier this month, Blunt referenced a study that said if a deal is not reached, the country could lose 700,000 jobs. He also said he worried farms would need to be sold in the event a family member, the owner, died and the current tax rate were allowed to expire. Tax rates on estates will rise to 55 percent.
Emerson issued her weekly address to constituents this weekend and focused on the fiscal cliff. She said that during the past year some positive change had been seen as federal spending dropped when budgets were trimmed and the economy recovered.She said "it is too little progress, too slowly."
She also called for a commitment to reducing spending and said the government should not attempt to tax its way out of the situation.
The Associated Press contributed to this report.
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