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Gov. Hassan weighs effects if federal spending cuts kick in

New Hampshire Union Leader

February 25. 2013 11:23PM
Gov. Maggie Hassan speaks after being sworn in as governor at the State House in Concord on Jan. 3. (UNION LEADER FILE)

CONCORD - As President Obama spoke to Gov. Maggie Hassan and other state chief executives Monday, the White House rolled out projections of state-by-state cuts it says will be required if $85 billion in mandatory spending cuts take effect as scheduled Friday.

The governors were briefed at the White House following a weekend meeting of the National Governor's Association in Washington.

The federal spending cuts - known as sequestration - are automatic and required by a law designed to cut the federal debt automatically if Congress and the administration cannot or will not agree on reductions.

Hardest hit in New Hampshire would be military payrolls.

Workers at the Portsmouth Naval Shipyard would effectively lose the equivalent of one day's pay per week as the result of a 20 percent furlough. An estimated 1,000 civilian defense jobs would be affected, reducing defense wage payments by a projected $5.4 million.

Hassan noted the furloughs would hit the state's National Guard as a state unit begins service in Afghanistan.

Educational aid would be cut by about $3 million. New Hampshire would see reductions of $2.2 million in aid to children with disabilities and more than $1 million targeted at secondary and primary schools.

An assortment of other programs would also be trimmed, including federal spending on law enforcement, pollution control, job search assistance for the unemployed and assistance programs in health and human services.

Hassan: 6,000 jobs

But while the Obama administration outlined broad categories and lump sum cuts, exactly where many of the cuts would fall, especially in education, is still unclear.

Hassan said that while the state has a broad understanding of the impact, it will be taking steps in the next few days to pinpoint where the federal dollars will stop flowing and figure out what to do about it.

"In New Hampshire, the impact, among other things, means losing 6,000 jobs and about 1 percent of our work force," Hassan said. "We will be reaching out to our state agencies and our municipalities, many of whom will feel the impact of sequestration cuts and we will talk to all of them to see how we will manage."

Nationally, some leading economists have predicted the $85 billion in federal cuts will reduce the country's economic growth by about one-half of one percent this year.

Economist Dennis Delay of the New Hampshire Center for Public Policy, a member of Hassan's advisory group on revenue projections, said the impact on the state will probably be a bit less than the national average - and notes some entitlement programs won't be touched.

"Federal spending in New Hampshire is a little less than the national average, for areas like federal defense and non-defense spending," Delay said. "Many major spending programs are exempt from the cuts, including Social Security and Medicaid (and some) social spending."

Economists fear that the direct reduction in defense spending in New Hampshire is just part of the impact.

Brian Gottlob, an economist with the New Hampshire economic consulting firm PolEcon, said while he doesn't believe all the cuts will take effect, the projected cuts at Portsmouth and in other defense programs are probably understated because many Granite Staters work for Massachusetts defense firms.

"I think the impacts in New Hampshire are likely to be greater than some estimate and unfortunately, they will occur at a time when the economy is among the least able to handle negative employment shocks," Gottlob said."You could probably say that employment would be about 2,000 less than it would have been in the absence of sequestration."

Senators speak

The automatic cuts are due to the impasse between parties in Washington on spending, deficit and debt reduction.

Both of the state's U.S. senators said Monday that the Congress needs to find a way to agree on a deficit reduction plan to take the place of sequestration.

"We wouldn't be in this situation if Congress did its job and passed a fiscally responsible budget on time," Republican Sen. Kelly Ayotte said. " I am continuing to work with my colleagues on alternative ways to prevent sequestration by cutting spending in a more responsible manner - protecting our national security, and New Hampshire's military facilities and defense suppliers."

Across the Senate aisle, Democratic Sen. Jeanne Shaheen also called for bridging the gap between the parties.

"We need a bipartisan, balanced and fair measure that incorporates both spending cuts and new revenues and avoids the sequester's automatic cuts," Shaheen said. "There will be serious consequences if Congress fails to act, so we need to come together and work out an effective compromise."

Obama urged the governors to lobby their congressional delegations to work out a compromise to reduce the federal debt and avoid the $85 billion in cuts.

"This sequester does not have to happen," Hassan said. "What we were trying to do in our conversations over the weekend is encourage members of both parties who serve as governors to reach out to Congress and make them understand."

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