Looming budget cuts wouldn't hit Minn. as hard as other states, experts say

Experts say sequestration, the across-the-board budget cuts scheduled to kick in March 1 that were part of the 2011 debt limit deal, wouldn't hit Minnesota as hard as it would other states.

Minnesota Management and Budget says the state is ranked 49th in terms of federal dollars spent per resident, which would lessen the impact seen in Minnesota.

Still, federal spending will drop by $85 billion if Congress doesn't act; its members are caught up in another disagreement over taxes and spending. Tuesday, President Barack Obama proposed a short-term fix to delay the sequester for a few more months. But House Republicans dismissed that right away as a gimmick.

The across-the-board cuts include some important exceptions like Medicare, Medicaid, Social Security and food stamps. Many economists predict the cuts could slow the economy significantly or even bring on a recession.

But Steve Bell, a budget expert at the Bipartisan Policy Center, said it will hit states unequally.

"It will hit Virginia, for example, very, very hard. It will hit Minnesota much less," he said.

Still, Minnesota Management and Budget projected last fall that the state could lose as much as $117 million from the federal government in the coming year.

MILITARY INDUSTRY, GUARD AFFECTED

Programs such as local law enforcement grants, low-income heating assistance and Head Start could take a hit. The cuts are split between defense spending and the rest of the federal budget.

While Republicans generally want to see federal spending cut, 2nd District Rep. John Kline said the sequester's meat-cleaver approach will gut the military.

He said National Guard units such as Minnesota's Red Bulls will also feel the pain. That unit has already been deployed frequently, and Kline said it could see more deployments if the regular army is cut due to the sequester.

"Most people ... in the high-tech sector, they just assumed this was going to happen."

"You put increasing pressure on the reserve component, the National Guard," Kline said.

Kline, a retired Marine colonel, said military contractors throughout the state will be harmed if the Pentagon slashes spending overnight.

But Chip Laingen, executive director of the Minnesota-based Defense Alliance, said that damage has already been done. The group represents high-tech defense contractors across the Midwest.

Laingen said members of his group saw the writing on the wall almost two years ago when the sequester was created as part of the 2011 agreement to increase the government's borrowing limit.

Most people that you talked to that were in the high-tech sector, they just assumed this was going to happen," Laingen said.

Many companies have already cut back and moved into non-defense lines of business where they can, Laingen said.

REPUBLICANS WANT "COOPERATION"

Still, after retreating on both the fiscal cliff and the most-recent debt limit increase, Republicans such as Kline see the sequester as a place where they can fight Obama and the Democrats on spending.

"We'd like to get some cooperation from the president and the Senate to get some other spending reform," Kline said.

By spending reform, he means major changes to Social Security, Medicare and Medicaid and other domestic spending programs.

That's a non-starter for most Democrats in Congress, especially liberal members such as Minneapolis Rep. Keith Ellison.

He proposed a plan this week that would replace the sequester with new revenue from closing tax breaks. And some of that money would go into short-term stimulus projects.

"If we are going to do cuts, and there are legitimate areas to do cuts, let's take the money from the cuts and plow it back into job creation," Ellison said.

The budget standoff between the parties has analyst Steve Bell convinced that this time, those countdown clocks on TV are going to hit zero.

"I hear more and more on the Hill people saying, 'well, maybe it's going to take something like a sequester and its impact and its pain before we'll get people to agree to things,'" Bell said.

But for now, no one is sure how much pain it would take to lead to an agreement.

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