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Budget Battle Effects in Mo.

January 24, 1996
By: Cassandra Sweet
State Capital Bureau

JEFFERSON CITY - State officials say the continuing budget grid lock in Washington should have no immediate impact on state programs. But they warn it could cause longer-term damage to Missouri's economy.

In addition to a continuing loss of federal jobs, large cuts in federal health care spending would lead to a significant loss of jobs in Missouri's health care industry, Budget and Planning Division Director Mark Ward said.

Ward said the Congressional proposals to cut the growth rate of entitlement programs such as Medicaid and Aid to Families with Dependent Children could lead to major cuts and even shutdowns of some federal programs.

"We'll see the changes in federal agencies right away and that will have an immediate effect on the Missouri economy," Ward said. "Deficit reduction will be a positive thing for the nation's economy and Missouri's economy, but there will be winners and losers."

Office of Administration Commissioner Dick Hanson said state departments have developed contingency plans to compensate for federal funds that are temporarily unavailable.

"Most (federally-funded programs) have been resolved," Hanson said, "but for those that aren't...we still have the state portions that act as a cushion."

Most federally-funded programs administered by the state receive a significant level of state funding as well.

The Department of Labor, however, has suspended most of its spending because only 10 to 20 percent of its budget comes from the state.

"We don't want to get into the position of advancing state funds for federal money that we're not sure will come through," Hanson said. "We're not in that position yet."

Because of the uncertainties, the state is refraining from spending money on programs such as job training, vocational rehabilitation and public safety, that have not been covered by the Congressional continuing resolutions.

Ward said with no overall agreement on what the 1996 budget will look like, it is difficult to plan ahead, especially if retroactive changes are made.

The federal government "might make changes retroactive to October first and we're more than halfway through our state fiscal year," Ward said. "The response from Capital Hill is that this is a revolution and revolutions are messy, so they are not responsive to any states' concerns regarding the problem of making changes retroactively."

As the debate continues over the best way to balance the federal budget, state officials see no end to the uncertainty as to how much federal funding will decrease and which areas will be hardest hit.

"We're concerned about both the short and long term impact of funding cuts," Ward said. "But despite present problems, it'll only get worse in the years to come."