Reality Check: Sequestration and its Impact on California

 Absent the fanfare that accompanied the fiscal cliff deadline last winter, members of Congress are now staring at yet another impending deadline with major fiscal implications.

Sequestration, a series of automatic budget cuts that would shrink federal spending in areas as varied as the armed services and medical research, takes effect March 1 without congressional action.
“I don’t think it’s devastating as much as it is stupid,” said Stephen Levy, Director and Senior Economist at the Center for Continuing Study of the California Economy. “Except for defense, the sequester misses the major drivers of the deficit: Health care and social security.” 
Levy examines economic and demographic trends in California, and sees sequestration as having a notable impact on the state’s economy, but not crushing economic growth and jobs in the manner that many fear.
“It’s very much a meat axe, or a targeted approach [to deficit spending] that includes research and development at the University of California, clean energy research and health research- the kinds of things that make the Bay Area and the California economy grow,” Levy said.
But the federal funding California stands to lose, about $10 or $11 billion, represents only about a half a percent of the state’s total economy, Levy explained.
“These cuts are targeted, and they will affect the people and the children who are affected by the cuts,” Levy said. “But there are millions of Californians for whom this means nothing, unless they get caught in an airport delay because there aren’t enough air controllers or TSA agents.”
Over the weekend, the Obama Administration released a report detailing how the sequestration cuts will be felt in all 50 states and the District of Columbia.
The report for California highlighted a loss of $88 million in funding for primary and secondary education, the ‘at risk’ status of some 1,200 teaching and aide positions, the elimination of 8,200 children from Head Start, a population of 64,000 civilian Department of Defense employees who would be subject to furloughs, and a loss of roughly $80 million to the Army and Air Force, among other cuts.
To confirm the accuracy of the report’s numbers, NBC Bay Area requested sourcing information from the White House. Despite several requests, however, that information was never provided.
When asked if 64,000 people seemed like a realistic number of civilian defense employees who could be furloughed, Levy paused for several seconds.
“There are only about 60,000 civilian DOD employees in the entire state of California,” he responded.
Levy figures the president’s estimate likely incorporates military contract positions, and assumes that all 60,000 civilian employees will be furloughed.
There are also elements of a potential defense sequester not being publicized, Levy said.
“Acting military personnel and their pay are not going to be cut,” he said. “The veterans’ benefits are not going to be cut. So all of the defense cuts are going to come out of civilians at bases and contracts for goods. They aren’t cutting the Army back.”
What about education funding set to be cut if sequestration takes effect?
The White House report forecasts hundreds of millions of dollars in cuts, describes 1,200 teaching positions as “at risk,” and claims 187,000 fewer students will be served.
“I think the figures are probably accurate in the aggregate,” said John Fensterwald, an education policy expert and editor for the group EdSource.
Fensterwald, however, said there are crucial pieces of information excluded from the White House report.
For one, Fensterwald said school districts have some flexibility in how they choose to address cuts. The assertion that 1,200 teachers and aides are at risk is “probably not” going to materialize, he said.
The federal government, in Fensterwald’s calculation, probably took the average salary of a teacher or support position and divided it by the total amount of cuts, assuming that school districts would counteract cuts with layoffs.
Secondly, Fensterwald explained that despite dire warnings of a March 1 deadline for sequestration, any changes to school funding wouldn’t actually take effect until July.
That gives Congress time, and ample opportunity, to negotiate a broader deficit-reduction plan.
“Kids will go to school,” Fensterwald said. “What services they’ll get, we don’t know. It’s just sort of a broad figure they use [to determine the number of people affected]. But it’s not going to be good, that’s for sure.”
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