Federal sequestration impact in Minnesota estimated at $90 million


Budget cuts stemming from federal sequestration could total $90 million in Minnesota, state officials told legislators on Friday.

But a month after the automatic, across-the-board federal spending cuts kicked in, Minnesotans who manage the federal dollars that flow to the state, local governments and nonprofits are still waiting for answers to many questions about how their programs will be affected.

“There are a lot of unknowns that remain,” said Margaret Kelly, state budget director at Minnesota Management & Budget. “While decisions have been made at the federal level, the implementation and the impact of those decisions are slow to trickle down to the state, in terms of tangible information.” State officials still don’t know the final amount of the reductions, she said, but $90 million is their ballpark estimate for 2013. Some cuts from sequestration could be offset by increases in parts of the federal budget, she added.

It’s a tiny chunk of the federal money that ends up in Minnesota every year. Federal funds make up nearly a third of the state budget – about $9.7 billion in 2014. Still, officials are quick to add that the effects of sequestration will be uneven, with some programs and individuals hit much harder than others.

Kelly and legislative fiscal analysts gave lawmakers an update about sequestration impacts at a meeting of the Legislative Commission on Planning and Fiscal Policy.

Some pots of federal money, including large amounts for Medicaid and national highways, are exempt from sequestration. Others are not, including Head Start programs for young children and WIC, the health and nutrition program for women, infants and children.

Hundreds of Minnesota children are likely to lose Head Start services as a result of sequestration, said Gayle Kelly, executive director of the Minnesota Head Start Association, who outlined the expected impact of cuts in a letter to members of the commission.

Head Start grantees must decide individually where to make the cuts, but the program’s national office is suggesting enrollment reductions, she said after the meeting. That’s because “this is, as far as we know, a permanent cut,” she said, and President Obama “has been very clear that he wants to maintain the quality of the program.”

“Minnesota has been dogged about not wanting to lose a single child,” she said, but so much of Head Start’s budget goes to employee salaries and benefits that it can’t maintain the same level of services and still make the cut of roughly 5 percent that federal officials have told the program to expect.

One frustrating aspect of sequestration, she added, is that Head Start officials are still waiting for a letter from the federal government telling them exactly how much to slice, “even though we have programs that are slated – and have been told to plan for – immediate cuts.”