Debt deal may be OK for states

Aug. 12, 2011 at 1:42 AM
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WASHINGTON, Aug. 12 (UPI) -- The U.S. debt deal struck in Congress this month may not be as difficult on states as originally thought, budget analysts say.

For fiscal year 2012, which begins Oct. 1, the legislation requires discretionary program spending be cut by $7 billion, reported Thursday. That means mandatory entitlement programs such as Medicare, Social Security and Medicaid will not be touched in fiscal year 2012.

The Aug. 1 deal calls for a limit on discretionary spending to a level of $917 billion over the next 10 years but does not mandate how Congress must meet the caps. The deal then allows for a slight year-to-year increase in discretionary funding after fiscal year 2013.

A second portion of the spending reductions is supposed to be decided by the so-called congressional supercommittee, which has been given the job of cutting another $1.2 trillion from spending. However, this group, made up of six congressional Democrats and six congressional Republicans, will likely not reach an agreement and spending cuts will be made through a "trigger" system, said.

Many programs that are expensive for states are not included in the trigger cuts -- including Medicaid, the Children's Health Insurance Program, Temporary Assistance for Needy Families (welfare) and the Supplemental Nutritional Assistance Program (food stamps).

However, programs such as education funding, affordable housing, and Head Start and other early childhood programs would be included in programs at the trigger stage.

"I don't think we really know how this is going to work," said Marcia Howard, a veteran state budget-watcher and editor of Federal Funds Information for States. "We're just taking it one step at a time."

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