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Archive for Wednesday, July 27, 2011

Brownback says his administration is preparing for reduced federal funds in event of default

July 27, 2011, 2:42 p.m. Updated July 27, 2011, 4:59 p.m.

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— As the gridlock continues in Washington over the national debt, Kansas Gov. Sam Brownback said Wednesday his administration is making plans for "a substantial contraction" in federal money to the states in the event of a default.

The Republican governor told reporters that his administration has calculated the amount of federal money Kansas could lose, a number he termed as a "target." He refused to disclose that internal figure, saying only that it's a substantial number. Brownback said half the state's resources come from federal dollars.

The state had predicted it would receive about $3.9 billion in federal funds for its current fiscal year, which began July 1. About $2.2 billion of that would help finance social services programs, while another $948 million would go to the public school and higher education systems.

Brownback said it is questionable whether the federal government will actually default on its debt because there is cash flow to make the interest payments on the bonds, but making those bond payments will leave much less money for operating the rest of the government.

"That is what I'm focused on. We are looking at what we can and what we need to do to really cut down on and anticipate far fewer dollars, because that is what will actually happen to the states," Brownback said. "The bonds will get paid first because it will be a higher priority by the government, but they will then stop making transfer payments to the states."

The governor also says his office is not planning for across-the-board program cuts because the federally funded programs that would be cut will be determined in Washington.

"But we may look at saying, 'OK, we want to backfill this piece of this program because it is critically important to us, but there are others that we just don't have the resources,'" Brownback said. "And we don't have resources as a state to do a complete backfill at the federal level — it is a far larger number than we can possibly reach."

The governor didn't specify which state services he thought would the most vulnerable in the event of the loss of federal monies.

Kansas Senate Majority Leader Jay Emler, a Lindsborg Republican, said his contacts with officials in various state agencies over the past month indicate that they're drafting proposals to deal with cuts of up to 50 percent in their federal funds in the future.

"We have no idea at this point how much less might be coming," Emler said.

But Emler said officials haven't been specific about why they are looking at scenarios for a big drop in federal funds, whether it would be caused by a default itself or federal spending cuts.

Meanwhile, the Kansas Department of Transportation, which has relied on bonds to finance highway projects, doesn't expect to see a short-term effect on its borrowing. Spokesman Steve Swartz noted that KDOT issued $350 million in bonds in September 2010, with an interest rate of just under 3 percent, and doesn't anticipate having to issue more bonds for another year.

Deputy Secretary Jerry Younger said KDOT doesn't expect to stop or slow down highway projects currently under construction. However, he said, it might have to reconsider whether to commit immediately to projects that have been planned but not started. The federal government reimburses Kansas for expenses incurred on projects, and the issue would be how long the federal government would delay those payments. But Younger said KDOT isn't likely to know until after Tuesday.

"To be honest, we don't quite know what's going to happen if the debt ceiling isn't raised," he said.

At the state Department of Social and Rehabilitation Services, officials are considering whether they'll have to draw down some of their federal funds in advance. Spokeswoman Angela de Rocha said SRS normally draws those dollars down daily, as needed.

The state Department of Education expects to distribute about $7 million in funds on Monday, said Deputy Commissioner Dale Dennis. The state probably can cover other small payments normally made from federal funds during the first 10 days of August, he said.

But, he added, the department distributes federal funds each month and, "If it isn't solved by the end of August, we're in trouble."

Brownback, a former U.S. senator who left federal office to run for governor of his home state, said he was glad lawmakers in Washington were getting serious about balancing the federal budget.

"I am glad we are finally getting serious about it because we have to," he said. "If we don't get serious about balancing our own budget, the market takes over and they decide whether or not the federal government is worthy of credit. And if they decide it's not, they are going to raise the interest rates a lot and it is going to cost everybody."

That said, the Kansas governor said he thinks lawmakers should be able to come up with a real package of reductions that are serious and substantial.

"It is doable. Really. A few people need to sit in a room and hammer that out," Brownback said. "It is far harder to get it done and passed, than to hammer the agreement out. That is the issue and I would urge people, if you can get a good deficit reduction, pass it and let's start dealing with our debt."

Comments

CountyResident 3 years, 4 months ago

WOW. Half of all of Kansas revenue comes from the federal government. Go tea party. Go Brownback. All these folks complain about the federal government and all the time Kansas gets half of it revenue from the federal govenment. How does Brownback even admit this.

George_Braziller 3 years, 4 months ago

A large portion of funding for state services has always come from the federal government. Federal dollars come to the state and then are distributed through state departments and then on to various programs. They are commonly called "flow through funds."

just_another_bozo_on_this_bus 3 years, 4 months ago

No problems. The Republican Party has become the party of Disaster Capitalists. They'll figure out a way to capitalize on this potential disaster.

Crazy_Larry 3 years, 4 months ago

The GOP blames our financial problems on unions, the sick and the poor.

Fred Whitehead Jr. 3 years, 4 months ago

Yep, these Republican facist terrorists have to stick together.

The day of judgement is coming and with any luck at all the Republicans will not be able to muster a candidate for dogcatcher for Wasilla, Alaska.

Richard Heckler 3 years, 4 months ago

Now he will cut more services but won't quit spending.... those liberal spending neoconservatives.

Cannot trust anything coming from Brownback or his admin.

1029 3 years, 4 months ago

Has anyone explored the idea of selling some of the eastern border counties to Missouri? I'm thinking at least put Crawford and/or Cherokee on the table and see if Missouri is interested.

notanota 3 years, 4 months ago

Don't tell me. Cutting the arts, SRS, and education was part of his preemptive plan to prepare for losing those funds by losing them early.

yourworstnightmare 3 years, 4 months ago

Half the state's resources come from federal dollars? Wow. Farm subsidies, oil subsidies, medicare.

Guess it is true that Kansas is a welfare state, that it receives more in federal money than it pays in taxes.

Better start selling off state assets, like, um, like, uh..... Jesus, does this state own anything of value?

yourworstnightmare 3 years, 4 months ago

True, but how much land is owned by the state? Kansas has the least amount of publically-owned land in the country.

cowboy 3 years, 4 months ago

Maybe the illustrious oh great pious one should actually speak out in support of a debt limit increase. That won't happen because he has little idea what responsible leadership is. His prior executive experience consisted of organizing the breakfast prayers at his cult residence in Washington. What a pathetic politician.

Joe Hyde 3 years, 4 months ago

"The governor also says his office is not planning for across-the-board program cuts, but looking at which parts of critical services the state could fund on its own."

Of course. It'll likely get done by the administration holding to its "no new tax" promises while simultaneously passing down the cost of underfunded state services -- if not the services themselves -- from state function to county and/or city functions. Your basic Ronald Reagen trickle-down effect when things economically go haywire. (Privatize the profits, socialize the cost of venture failures.)

Kansas, of course, would survive the most severe of cuts in great style by continuing to be a physical feature that curious school kids look for on world maps. And yes, our ultra-conservative Republican legislature would eagerly help the governor support and enact many "emergency fiscal changes" that would further enrich the state's wealthiest citizens and corporations following any Default Crash.

Middle class Kansans and families should brace for the possibility of new and very hard hits inflicted on the world they grew up in and trusted. This whole deal could soon get to be real special. Hope I'm wrong.

Of course, very few in the Kansas Legislature or U.S. Congress seem remotely interested in the idea of "cutting taxes" by means of ordering home all our troops from Iraq and Afghanistan. We get loose from those two Hell holes, more of our federal tax dollars can stay here and many things domestic start taking care of themselves. For one thing, more of our federal tax dollars get spent paying down the national debt. Plus we'd suddenly be freed up to do all sorts of ordinary stuff domestically that benefits everybody instead of primarily the wealthiest of us.

Sure wish we could work past this most recent national fascination with, and romantic glorification of, war. Waging overseas wars, supporting troop operations thousands of miles away for ten years and longer, it sure does eat up taxpayer dollars.

Crazy_Larry 3 years, 4 months ago

"Brownback, a former U.S. senator who left federal office to run for governor of his home state, said he was glad lawmakers in Washington were getting serious about balancing the federal budget."

WTF happened? When he was in Washington DC, President Bill Clinton left office in 2000 with a projected budget surplus. It wasn't balanced, it had a surplus of cash! What happened Brownback? Why did you participate in the bankrupting of this country? You are an evil person, Sam Brownback.

Steve Jacob 3 years, 4 months ago

And during that time, we raised taxes like crazy. Nobody cared because the economy was booming.

gudpoynt 3 years, 4 months ago

It's not all rosy of course. Another thing that happened during the Clinton administration was the nail in the coffin of Glass-Steagall, forged by a Republican Congress, and hammered in place by Clinton's signature, which practically erased the very practical distinction between commercial and investment banking.

One of the major effects of this legislation was that investments by commercial lenders became riskier and riskier, while the communication of this risk to the loan officers and consumers became more and more opaque.

In other words, because of relaxed regulations and a lack of transparency, credit became super cheap to middle income Americans, and profits became super large for the financial industry.

And this all looked super good on paper, both for US GDP and for US per capita income.

But we all know where it lead.

Granted, the US economy might have been in a better position to withstand the bursting of the housing bubble had our government not already racked up trillions in debt because of tax breaks and foreign wars.

But my point is that the golden economy of the 90's and early 00's doesn't look so shiny in retrospect, considering that part of it's luster was due to some of the questionable economic policies that have contributed to the dimness of our current plight.

Crazy_Larry 3 years, 4 months ago

Bill Clinton's FFY 2000 Budget

http://www.gpoaccess.gov/usbudget/fy00/pdf/budget.pdf

Six years ago, when my Administration took office, we were determined to create the conditions for the Nation to enter the 21st Century from a position of strength. We were committed to turning the economy around, to reining in a budget that was out of control, and to restoring to the country confidence and purpose. Today, we have achieved these goals.

The budget is in balance for the first time in a generation and surpluses are expected as far as the eye can see. The Nation’s economy continues to grow; this is the longest peacetime expansion in our history. There are more than 17 million new jobs; unemployment is at its lowest peacetime level in 41 years; and today, more Americans own their own homes than at any time in our history.

Americans today are safer, more prosperous, and have more opportunity. Crime is down, poverty is falling, and the number of people on welfare is the lowest it has been in 25 years. By almost every measure, our economy is vibrant and our Nation is strong.

Brownback helped crash this country, and a bunch of redneck illiterates saw fit to make him the governor of Kansas! W.T.F.

Crazy_Larry 3 years, 4 months ago

Oh yeah, they spent the surplus investigating Clinton's bj. How much did they spend investigating Bush Co. lying us into a war in Iraq? How much did they spend investigating the events of 9-11 that led us into these endless wars? How much did they spend investigating Wall Street?

The Financial Crisis Inquiry Commission spent $8 million.

9-11 Commission spent $15 million.

Bill Clinton's BJ investigation cost us $40 million.

Crazy_Larry 3 years, 4 months ago

I apologize for the name calling, and promise to take my meds as prescribed...

Katara 3 years, 4 months ago

So is Brownback including the amount of Federal monies we stand to lose because of his policies? Or is that on top of what they are calculating for a default?

jayhawklawrence 3 years, 4 months ago

That makes brownback an accessory to the crime. If this default occurs I am going to dedicate myself to political activism. These fanatics have to go.

Jimo 3 years, 4 months ago

Half the population doesn't pay taxes on wealth - federal income taxes. That's because they aren't wealthy. And so the tax that is supposed to capture wealth - federal income taxes - doesn't cover them. What's next? Complaining that estate taxes aren't being levied on estates of paupers?

Poor people aren't wealthy. Retirees aren't wealthy. Children aren't wealthy. Comatose patients lying in a hospital bed aren't wealthy. Those captured in the prison-industrial complex aren't wealthy.

What's really worrisome is that only a small percentage of people pay almost all the federal income taxes. But only because that small percentage of people are collecting almost all the income produced by the nation's economy. That situation doesn't arise naturally but as the consequence of quite a lot of planning and effort. A real conservative would find that troublesome and unsustainable.

gudpoynt 3 years, 4 months ago

excellent response to predictable echo.

mloburgio 3 years, 4 months ago

Nearly 10 Years Ago Today, The U.S. Began Borrowing Billions To Pay For The Bush Tax Cuts

The opponents of the tax cut turned out to be right. The 2001 and 2003 tax cuts combined have blown a $2.5 trillion hole in America’s budget and created deficits stretching on for years.

http://thinkprogress.org/special/2011/07/20/273795/ten-years-ago-bush-tax-cuts/

sciencegeek 3 years, 4 months ago

Talk about a gift! Now Brownback can make draconian cuts to anything-but-the-rich and blame it on the feds! Eliminate everything in SRS that isn't faith-based! Cut the state work force in half! Close half the public schools!--and it's all because of the big bad (Democratic) wolf in DC! Oh, and BTW, it's all God's will.

First Fred and now Sam. No wonder the nut jobs from Arkansas and Michigan pick I-70 to show their craziness--they feel right at home here.

billbodiggens 3 years, 4 months ago

Do not be surprised as to how much of the state budget is funded by the Feds. This has been the case for decades. I am not certain what the situation is today, but at one time nearly the entire KBI budget was of federal funds. And it goes on and on and on. Many years ago I remember trying to visit with a local legislator about this problem and he would not even touch the subject. In fact, he completely ignored the question. It would appear that the general fund problem in Kansas is not much of a problem after all compared to other areas of funding. How did we get this way? Greed and a sense of entitlement by our state legislators who do little other than purchase votes with the money of others. Contributing to the common good is not a serious priority for those people.

parco814 3 years, 4 months ago

I should think that SB would relish the default. Could lead to the equivalent of the rapture in political terms, with the poor dying in the streets and and supplying heaven with fresh souls. Oh, my bad, those immoral poor folks shall go to hades.

Jimo 3 years, 4 months ago

It perhaps is expecting too much for this article to note the irony that Brownback worked day and night to run up the debts in question. As so often happens in any reporting on "Governor" Brownback, there's barely an acknowledgment that Sam has a record on these issues. Gee, who cut out trillions in tax revenue, who voted for war after war, etc., etc., etc.?

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