WASHINGTON – Thousands of Arkansans could lose their jobs and the state could lose millions in federal support if Congress fails to strike a deal on indiscriminate budget cuts set to take effect on March 1.
The cuts, divided between defense and domestic programs, were designed back in 2011 to be an unpalatable time bomb to force policy makers to reach a compromise on reducing the nation’s deficit.
Federal Controller Danny Werfel estimated that the hit the automatic cuts would deliver to the national economy "translates into hundreds of thousands – if not more – of job losses."
About 9,150 Arkansans could lose their jobs due to the impact of sequestration, according to a George Mason University study prepared for the Aerospace Industries Association.
Arkansas could also suffer a $920 million loss in economic productivity because of the cuts, according to the study by GMU economist Stephen Fuller.
Lawmakers return to Capitol Hill on Monday with Democrats, Republicans and the White House opposed to the $85 billion in automatic spending cuts but lacking any agreement on how to avoid them.
"Sequestration is going to be bad. It creates a lot of hardship," said Sen. Mark Pryor, D-Ark.
Sen. John Boozman, R-Ark., said that time appears to be running out on reaching an agreement.
"Given the time frame, it appears we are going to have to work through (sequestration)," Boozman said.
Pryor and Boozman spoke at a recent Senate Appropriations hearing where agency leaders described the impact the broad-based cuts are expected to have on the nation. In the last week, more details have surfaced.
Medicaid, Social Security, Food Stamps, veteran benefits and federal transportation dollars are exempt from the cuts. Nearly 900 discretionary spending accounts will be reduced by 9.4 percent for defense and 8.2 percent for domestic programs.
The Pentagon plans for sequestration include: A $23 million reduction to Pine Bluff Arsenal, a cut of $9.4 million to Fort Chaffee in Fort Smith and $17.8 million to Camp Robinson in North Little Rock.
The Arkansas National Guard would lose $13.3 million and the Arkansas Army Reserve $6.82 million.
The Air Force and Army also plan to furlough civilian employees likely one day a week for up to 22 weeks starting in late April. A projected 2,782 Arkansans would lose $19.6 million in wages.
Defense Comptroller Robert Hale said the military furloughs would save between $4 billion and $5 billion, leaving another $40 billion to be extracted from cutbacks in weapons purchases, service contracts and other Pentagon spending.
Agriculture Secretary Tom Vilsack said that furloughing food safety inspectors would be the last option for the agency to achieve required cuts but acknowledged it is a possibility given the need to reduce USDA’s budget by $2 billion.
Arkansas could be hit particularly hard if the 6,000 meat safety inspectors face furloughs because poultry and other processors cannot operate without them in the plant.
"These furlough could result in as much as 15 days of lost production, costing roughly over $10 billion in production losses, and industry workers would experience over $400 million in lost wages," Vilsack said.
Closing meat processing plants for 15 days would mean as much as 3.3 billion pounds of chicken and 2 billion pounds of egg products would not be processed – driving up prices and disrupting the food supply, Pryor said.
Arkansans who use rural airports could also feel an immediate impact as plans are under way — should sequestration be triggered — to close the air traffic control towers at airports in Fort Smith, Springdale, Fayetteville and Rogers. The overnight shift at the control tower in Little Rock would end, according to Transportation Secretary Ray LaHood.
The closings are part of the Federal Aviation Administration plans to save $600 million by shutting 100 air traffic control towers at small airports, eliminating overnight shifts at 60 towers and furloughing 47,000 employees at least one day a pay period.
Arkansas would lose nearly $26 million it receives through 19 federal programs, according to estimates provided by the National Education Association.
The largest hit would be to public school districts serving large populations of students from low-income families. About 250 Title 1 school districts in Arkansas would lose $7.9 million.
Little Rock would likely lose more than $500,000, Fort Smith and Pulaski County more than $250,000 each, North Little Rock around $225,000, Pine Bluff and Springdale more than $150,000 each, and Fayetteville and Rogers more than $120,000 each, based on the NEA figures.
The association’s estimate for Arkansas also includes a $5.7 million cut in IDEA Special Education grants and a $3.8 million reduction in Head Start funding.
A sequester report by Democrats on the House Appropriations Committee projected different losses in education funding for Arkansas. They said the state would lose nearly $6.3 million in Title 1, nearly $6 million in special education and about $4 million in Head Start funding.
Arkansas State University in Jonesboro, the University of Arkansas in Fayetteville and the UA-Pine Bluff could lose as much as $3.6 million in research grants from the National Institutes of Health, National Science Foundation and Department of Energy, according to a coalition of university associations.
The University of Arkansas for Medical Sciences, meanwhile, is bracing for as much as $12.2 million in reduced federal funding for research and patient care under sequestration.
Arkansas would also lose about $3.9 million in federal funds for job training programs, according to the National Skills Coalition. The coalition estimates that more than 10,000 fewer Arkansans would be assisted because of sequestration.
No formal legislation has been offered in the current session of Congress to replace the automatic spending cuts, but the White House, House Republicans and Senate Democrats have outlined separate plans.
Senate Democratic leaders have outlined an alternative that would raise $110 billion. Half would come by requiring households earning more than $2 million a year to pay at least 30 percent of their income in federal taxes. The other half would come by eliminating direct payments to farmers and from reduced military spending after the planned end to combat operations in Afghanistan next year.
The Agriculture Council of Arkansas opposes the cuts to farm subsidies.
"Eliminating this important program for farmers without a viable safety net alternative for this region is irresponsible and damaging to Arkansas agriculture," said Andrew Grobmyer, executive vice president of the council.
House Republicans have balked at raising any additional revenues to close the deficit, insisting instead that the across-the-board cuts should be replaced with more thoughtful spending reductions.
"By insisting we tax our way out of this mess rather than accept our spending addiction, the president and Senate Democrats are threatening the security of our nation, and any proposal that replaces real spending cuts with more taxes will not and should not be approved," said Rep. Steve Womack, R-Rogers.
Alternative spending cuts that Republicans have suggested include reductions in the Food Stamp program, cuts to ObamaCare and elimination of waste, fraud and abuse in other programs.