Nov. 14 2012 12:00 AM

What going over the fiscal cliff would mean for Lansing

Lots is at stake in Lansing in the fight over the fiscal cliff.

The term is used to describe federal sequestration, a series of automatic, across-the-board spending cuts and tax increases that could take effect in January if Congress can’t enact a plan that would reduce the national deficit by $1.2 trillion. If Congress fails, then $1.2 trillion would be cut over the next nine years at about $109 billion a year from military and non-military programs. Dozens of programs in Michigan and in Lansing would be affected. The exact cuts to local agencies are unknown at this point, but states are looking at between 7 percent to over 9 percent cuts for federally funded programs across the board — which means the money going from the federal government to the states will decline, leading to less money allocated by states for local programs. 

A report released last month by the Michigan League for Public Policy outlines programs that would be affected if we end up tumbling off the fiscal cliff. Community health, education and job training programs are all on the table. 

Federal funding for Lansing educational services like Head Start and money for programs for at-risk youth like Title I grants would be trimmed back, said Yannet Lathrop, a policy analyst fellow with the MLPP. 

Lucy McClintic, director of the local Head Start branch, Capital Area Community Services Inc., said there’s “no way” CACS could absorb the budget reduction without cutting back on services. She said if sequestration happens, salaries and positions would likely be cut and it might come down to limiting the number of children CACS serves. 

“Yes, we are worried,” she said. “We certainly would hate to have to eliminate services to any children and families.”

CACS spans four counties, employing about 300 and serving 1,617 children with a budget of about $12.5 million. McClintic said 1,076 of those children live in Ingham County. 

According to the MLPP report, Michigan would lose about $22.6 million in funding for Head Start, which would affect roughly 3,000 kids and cost 940 jobs around the state. The report also says Title I money would take a big hit in the state — to the tune of $45.5 million.

Craig Thiel, a senior consultant for the East Lansing-based consulting firm Anderson Economic Group, said while Title I cuts may not drastically affect school districts like East Lansing, Haslett and Okemos, it would definitely be felt by districts with more low-income students like the Lansing School District, which receives $2.5 million in Title I money annually. That money has been used in the past to help pay for all-day kindergarten. 

Lansing School Board member Peter Spadafore said the cuts could go way beyond Title I money. Other funding on the table includes money for lunch programs, class size reduction funds, special education and English language learner programs.

“It’s our most vulnerable populations that will be affected,” he said. “We can’t take another hit. We’re already dealing with state reductions, another cut in funding would be a devastating blow to our already fragile budget.” 

Lansing Community College would also be hit if the spending cuts go through, but it would be the students that would wind up carrying most of the burden, said Stephanie Bogard Trapp, director of financial aid at LCC. Student grant and loan programs would be hit with cuts, which would force them to pay more for tuition out of pocket. She said pools of students who receive need-based grants would likely shrink and interest rate and loan fees could rise. 

“It is very serious, and we are definitely worried about it,” Trapp said. 

Health services would also be chipped away at if the sequestration comes to fruition. Jake Distel, executive director of the Lansing Area AIDS Network, said the funding reduction could be “potentially devastating.” 

Distel said the LAAN helps provide medical treatment to 337 people and provides prevention services to over 1,000 residents in the Lansing area. He said LAAN’s budget, which is about $820,000 a year, has already taken a “consistent hit” from other spending cuts.

For the Ingham County Land Bank, sequestration isn’t a major concern. However, the program stands to lose half of its funding after this year when $5 million of Obama stimulus funds dry up, said Land Bank Chairman Eric Schertzing, who is also the Ingham County treasurer. He said 2013 will be a “transition year” with a heavy focus on marketing the 70 properties the Land Bank has in its stockpile. He said income from those home sales and getting “creative” in trying to find other funding sources would be key. 

For all of these potentially drastic cuts, though, some say it appears unlikely that the country’s headed off the fiscal cliff. Even local business leaders are holding a press conference this morning in Lansing to announce the Fix the Debt Michigan coalition, which is asking policymakers to solve the nation’s long-term debt and warns that falling off the fiscal cliff could mean another recession.

Mitch Bean, a principal at Great Lakes Economic Consulting in Eaton Rapids, along with Thiel at the Anderson Economic Group, believes the reelection of President Obama will help move the negotiations along. 

“If (Obama) had not been reelected, it would have been more likely that we would have had an extension where they kick the can down the road six months to a year,” Bean said. “That’s less likely now, President Obama will hold the fire to people and get a deal sooner rather than later, which I think is the right thing to do.”