DURING the 2013 session, Oklahoma House Speaker T.W. Shannon filed legislation requiring state agencies to prepare for up to 25 percent reductions in federal funds. The Legislature passed the bill, but Gov. Mary Fallin vetoed it, saying it was duplicative. Fallin noted that the executive and legislative branches were already supposed to review federal funding at state agencies and such planning should already be ongoing.
Fallin may have been right about the bill, but Shannon, R-Lawton, was clearly right to note the problem of state agency reliance on federal funding. The federal government shutdown led to reports that nearly 400 Oklahoma state employees are expected to be furloughed, most at the Department of Rehabilitation Services and the Oklahoma Military Department. Other agencies may also furlough employees.
It's an open secret that federal spending is embedded throughout state government. While officials often decry the strings attached — particularly in public schools — they notably don't refuse the money. With financial upheaval now becoming routine at the federal level — and the undeniable fact that current federal spending is unsustainable — it may be time to reconsider state dependence on federal funds.
The 2013 State Policy Guide report issued by the Mercatus Center at George Mason University notes, “States rely on grants from the federal government for nearly one-third of their entire budgets.” The problem with this heavy reliance extends beyond dealing with government shutdowns. The Mercatus study warns that “temporary federal grants today tend to result in higher state and local taxes tomorrow.”
“When states accept temporary federal aid to create or expand a public program today, they will inevitably be forced to either cut the program or raise state and local taxes to cover its costs when federal aid ends,” the report says.