The Consequences of the Romney-Ryan Budget Plan on State and Local Budgets

The Burden of Drastic Cutbacks in Federal Investments for States Will Cost the Middle Class Dearly

Rep. Paul Ryan (R-WI), right, addresses an audience as former Massachusetts Gov. Mitt Romney, left, looks on during a Romney campaign event at an oil company in Milwaukee, Monday, April 2, 2012.

Download the PDF here.

State-by-state tables detailing the consequences of the Romney-Ryan budget plan on state and local budgets are available in the PDF version of this issue brief.

Republican presidential and vice presidential contenders Mitt Romney and Paul Ryan promise enormous cuts in overall federal spending, totaling more than $4 trillion over 10 years, if they win the election on November 6. At the same time, the former Massachusetts governor and Wisconsin congressman promise enormous amounts of new spending for the Pentagon—more money, in fact, than the Pentagon itself says it needs. Gov. Romney and Rep. Ryan also offer assurances that there will be no cuts to Medicare or Social Security for those over the age of 55—a promise at odds with their vow to repeal the Affordable Care Act, which improved Medicare benefits and lowered costs for current seniors.

Taken together, these promises necessarily mean that the entire bulk of the Romney-Ryan spending cuts will necessarily fall on the remaining 40 percent of the budget. And unfortunately for state and local budgets, nearly all of their federal funding can be found in that remaining 40 percent. This money supports local schools, law enforcement efforts, highway repairs, and job-training programs. It ensures children do not go hungry and helps provide health insurance to more than 38 million of America’s children. All of those services and investments and many more would be slashed dramatically under the proposed budget policies of Gov. Romney and Rep. Ryan.

The simple math dictates that for the Romney-Ryan plan to achieve its spending goal, the two men if elected would need to cut nearly all federal grants to the states by a staggering 40 percent by 2016. And that is in addition to the nearly 30 percent cut to Medicaid that would result from their plan to transform Medicaid into a block grant. In fact, their budget plan would cost states approximately $32 billion in federal investment in 2013 alone, and more than $2.6 trillion over the next 10 years. The Romney-Ryan agenda could mean devastating cuts to critical programs, including:

  • The Head Start program for pre-kindergarten children. Head Start provides at-risk preschoolers with the education, health, nutrition, and family support services needed to help them succeed. Under their plan, in 2013 alone states would lose $974 million from Head Start. More than 139,000 kids would be kicked off of Head Start. Over the next 10 years, states would lose more than $39 billion in Head Start funding.
  • Funding for highways and interstates. Investing in our country’s highways and infrastructure creates jobs—about 30,000 jobs for every $1 billion of investment. Under the Romney-Ryan plan, $2.9 billion would be cut from federal funding for our country’s highways in year one. Over the next 10 years, states would be on the hook for $117.7 billion in lost federal investment in highway infrastructure.
  • School Lunch and School Breakfast. In 2011 more than 31 million children depended on the School Lunch and School Breakfast program for free or reduced-price meals at school. But the plan put forth by Gov. Romney and Rep, Ryan would cut $96 billion from the program over the next 10 years. This would increase child hunger, inevitably leading to worse educational outcomes and higher long-term health costs.

The consequences of these kinds of cuts would be devastating. States and localities would be forced to face an unhappy choice—they could try to fill in the lost funding by increasing state and local taxes, or they could allow these programs, services, and investments to be curtailed dramatically. Either way, the middle class and those with low incomes will pick up the tab.

Figures 1 through 4 in the PDF version of this brief show what the Romney-Ryan budget will mean for every state in the union. Download the PDF here.

Methodology

In order to estimate the effect of the spending plans of Republican presidential and vice presidential contenders Mitt Romney and Paul Ryan on federal funding for states, we begin by estimating the percentage cut in overall spending that would be required given their stated spending proposals. For federal spending they propose to:

  • Cap all federal spending at 20 percent of gross domestic product
  • Increase defense spending to 4 percent of gross domestic product
  • Make no cuts to Medicare or Social Security in the next 10 years
  • Repeal the Affordable Care Act, including the Medicare savings, which would increase Medicare spending by more than $700 billion
  • Transform Medicaid into block grants to the states

In order to comply with the Romney-Ryan spending cap after accounting for the spending effects of the other policy proposals, the former Massachusetts governor and House Budget Committee chairman from Wisconsin would need to cut all other federal spending—that is spending aside from Social Security, Medicare, Medicaid, defense, and net interest—by about 11 percent in 2013, growing to 63 percent by 2022, for an annual average of 39 percent over the next 10 years. These calculations rely on the following assumptions:

  • The Romney-Ryan plan would reduce federal spending to fully comply with their proposed spending cap by the end of 2016.
  • From 2013 through 2015 their plan would reduce overall federal spending to levels consistent with the House Republican budget plan, authored by Rep. Ryan.
  • The Romney-Ryan plan to turn Medicaid into a block grant will be roughly consistent with Rep. Ryan’s plan as detailed in his most recent budget plan. Furthermore, no additional cuts will be made to Medicaid beyond the effects of repealing the Affordable Care Act and turning the program into a block grant.
  • The baseline, against which the percentage cuts are calculated, includes a permanent fix to the Medicare Sustainable Growth Rate formula, a repeal of the “sequester” automatic spending cuts, and the drawdown of U.S. military forces in overseas combat operations.

In order to estimate how these cuts would specifically impact states, we started with U.S. Census Bureau data on federal aid to states in fiscal year 2010—the most recent year for which data are available. We adjusted these data to account for the anomalous effects of temporary measures to boost the economy. Specifically, we removed extra funding for elementary and secondary education as well as extra highway funding. We then extrapolated fiscal year 2013 through 2022 funding by using the most recent Congressional Budget Office baseline estimates. For mandatory grants we used CBO’s spending growth projections specific to those particular programs. For discretionary grants we used the general growth projections for nondefense discretionary spending.

Since nearly all federal grants to states, with the notable exception of Medicaid, fall into the “other federal spending” category, we applied the annual percentage cut required to comply with the Romney-Ryan plan’s proposed cap to the baseline projections of all non-Medicaid grants. But since their plan has a separate policy for Medicaid, we did not apply the “across-the-board” percentage cut to that program. Instead, for Medicaid, we applied the annual percentage cut that would occur under the “block grant” proposal from Rep. Ryan that is broadly similar to Gov. Romney’s outlined proposal. This cut also includes the effect of repealing the Affordable Care Act.

Michael Linden is Director of Tax and Budget Policy at the Center for American Progress Action Fund. Lori Lodes is Vice President of the Think Progress War Room at the Action Fund.