Sequestration's Effects in New Hampshire Would Be Small, But Wide-Ranging

Feb 28, 2013

The across-the-board budget cuts set to go into effect Friday will reduce funding for programs that help a broad range of Granite Staters, from pre-schoolers to senior citizens.

But the impact of the cuts, known as sequestration, on New Hampshire will be relatively small compared to states whose economies rely much more on federal money.

Federal spending represents about 3.1 percent of the state's gross domestic product versus a national average of about 5.3 percent, according to a recent analysis by the Pew Center on the States.

Dennis Delay, an economist with the New Hampshire Center for Public Policy Studies, says the consensus among economists he's spoken with is that sequestration would cut the nation's GDP by about one half of one percent. Because of New Hampshire's smaller share of federal funding, the cuts would shave about half that amount — about one quarter of one percent — off the Granite State's projected growth.

"Assuming the sequester is proportioned evenly among the states, New Hampshire, because it relies less on the federal government than other states, shouldn't be impacted as much as the national average," Delay says.

The sequester was part of the Budget Control Act of 2011, which established a "super committee" to come up with ways to reduce the federal budget deficit by $1.2 trillion over ten years. The committee failed to reach agreement on a mix of spending reductions and new tax revenue, triggering the automatic cuts - 7.9 percent for defense-related programs, 5.3 percent for domestic discretionary spending, which includes education, transportation, parks and social programs.

The sequestration was originally scheduled to take effect in January, but the deadline was pushed back until March 1 as part of an agreement late last year to avoid the "fiscal cliff."

While in Washington earlier this week for the annual winter meeting of the National Governors Association, Gov. Maggie Hassan told reporters that the cuts would cost New Hampshire about 6,000 jobs, including those of teachers and day care workers.

Meanwhile, the Obama administration has released a state-by-state breakdown of which government programs will bear the brunt of the cuts. The analysis suggests that while the Granite State's reliance on federal funding is low compared to many states, the projected reductions will have an impact on government functions that many residents, especially those with lower incomes, rely on.

New Hampshire stands to lose about $3.3 million in federal education funds. The cuts would take effect in the fall, and reduce funding for primary and secondary education programs, known as Title 1, by an estimated $1.1 million. Services for about 1,000 students would be eliminated, while about 10 schools would lose funding.

New Hampshire will also lose $2.2 million in federal funds to educate children with disabilities. Some 30 teachers, aides and staff who work with disabled children would lose their jobs.

Around 120 low-income college students would lose aid, and cuts to work-study programs would impact another 130 students. Meanwhile, early-education programs, like Head Start and Early Head Start, would be eliminated for approximately 100 children.

Federal money for job-search assistance, referral and placement would be cut by $138,000. That will reduce assistance for 4,950 New Hampshire residents who rely on the grants to help them find work.

Cuts to several public health programs will cost the state more than $560,000, including a $126,000 grant aimed at helping state officials respond to infectious disease outbreaks and natural disasters.

Another $46,000 cut will mean almost 700 fewer children will have access to vaccines for measles, mumps, tetanus, whooping cough and hepatitis B. Substance abuse programs will see a $330,000 reduction in funding, while the Department of Health Statistics and Data Management will lose about $60,000, resulting in around 1,500 fewer HIV tests.

A federal program that helps pay for meals to income-eligible seniors will also be cut by $225,000.

New Hampshire will also lose $1.9 million in environmental funding. Grants to ensure clean water and air will be reduced or cut, along with funding for fish and wildlife protection.

In a statement issued this morning, Hassan's communications director Marc Goldberg said that, while the full impact of sequestration will be felt over time, the "senseless" cuts could hurt the state's fragile economy.

"The Governor continues to be in communication with state agencies about the significant impact that sequestration will have on state services," the statement said, "but if Congress does not take action, there will be no way to avoid the effect of the loss of federal funds for critical programs like Meals on Wheels, early education, and childhood health care."

Charlie Arlinghaus, president of The Josiah Bartlett Center, a free-market think tank, says the the cuts will not have much of an impact on New Hampshire's economy.

"The federal government spends a ton of money in NH," Arlinghaus says. "If you're one of specific things affected it's bad for you. But in terms of the economic effect on the state as a whole, it's very minor.

Arlinghaus says members of Congress could agree to once again extend the deadline for sequestration. Even if they don't, because the cuts would take effect gradually, they could be restored as soon as the two sides in Washington reach an agreement.

"The important thing to remember is that there is no hard and fast deadline, and it could all be restored fairly easily," Arlinghaus says. "That's why the general public has sort of tuned out, because they don't believe there is a real crisis. They think it's a bunch of politicians talking."