The Lone Star State Left Out To Dry

When the sequester deadline came and went last Friday, it was hardly a surprise. In Congress, Republicans had repeatedly made clear they would be willing to let enormous cuts to discretionary spending take effect rather than compromise with the White House on raising revenue. But cutting off their nose to spite their face hasn’t quite worked. As it turns out, the GOP may be defacing its figurehead: the State of Texas.

The economic impact of the sequester on Texas will be enormous. As a Pew Charitable Trusts study shows, Texas receives 8 percent of its state revenue through federal grants, well above the national average of 6.6 percent. Only South Dakota, Illinois, and Georgia receive a higher proportion. One study from George Mason University showed that Texas is among the top three states that will lose out most as a result of the sequester, both in terms of jobs and GDP. The cuts could cost Texas $16 billion in gross state product—1.23 percent of the state’s GDP—and as many as 159,000 jobs. It’s scary news for a state that’s only just beginning to feel the effects of the economic recovery.

The cuts to the state’s military bases are especially drastic. Texas, along with California and Virginia, leads the country in Defense Department contracts—an area of spending bearing the brunt of sequestration.  According to the White House, Texas will lose $233 million in funding for army bases and $27 million in funding for Air Force operations. An estimated 52,000 civilian workers with the Department of Defense will go on furlough; Fort Hood alone—one of the country’s biggest army bases, located in Killeen—could furlough 5,000 civilian workers.

But as the Prospect's Jamelle Bouie points out, the sequester won’t just affect those who get furloughed or lose their jobs: It will impact the whole economy. Texas has the most active military personnel in the country—131,500—and the aerospace and defense industries employ a total of 341,000 people there. Entire town economies rely on military families to patronize restaurants, car dealerships, movie theaters, and just about everything else. Many small businesses also work as suppliers to larger defense contractors. 

Federal Reserve Chair Ben Bernanke has estimated that the cuts could have a half a percent drag on the U.S. economy, slowing down growth just as states are beginning to feel the effects of the economic recovery. For a state like Texas, just feeling a lift from the recovery and hoping for momentum, the drag is a scary prospect. State Representative Charles Perry, a Lubbock Republican with no relation to the governor, has already begun expressing concern over how the sequester will impact tax revenue. “You could see a decline in consumer confidence and a pull-back in consumer spending,” he told his local Fox News station, “which would have a direct impact on sales tax collections." To make matters worse, the sequester cuts would take $2 million away from the state’s job-search assistance, meaning 83,750 fewer people would get help finding employment, presumably one of the keys to recovery.

Adding to concerns are the sequester’s implications for Texas airports, the gateways for much of the business that happens in state. Air travel is vital in a state that takes nearly 12 hours to traverse by car, and the cuts to air-traffic control will have a widespread impact. Austin's airport is among 60 across the country that will lose an air-traffic controller for its midnight shifts. In addition, 19 small regional airports in Texas are slated to lose their air-traffic-control tower personnel altogether. The U.S. Department of Transportation has already warned that the cuts will mean long waits at some of the country’s biggest airports—which will likely include Dallas-Fort Worth and George Bush Intercontinental in Houston.

But perhaps even more concerning is the impact the cuts would have on the state’s most vulnerable, for whom the loss of federal dollars will only make worse an already bleak situation. Even before the Great Recession, Texas barely had a safety net. But since 2011, when the Tea Party-led legislature passed a budget that slashed education funding by $5.4 billion, including funding for pre-K, and drained many of the state’s welfare programs. Federal dollars have helped maintain several of the key programs that are left, but the sequester cuts could change that.

Most significant, the Texas Education Agency estimates the state will lose a total of almost $518 million, including $67.8 million in Title I funding for schools with high proportions of low-income students. That’s equivalent to 930 teacher and teacher’s aide jobs, which would impact 172,000 children. Adding to the difficulties schools already face would be the loss of $51 million in funding for children with disabilities. Schools would have to make up for that funding, as the programs are still required by federal law, so the cuts would likely come from elsewhere.

The cuts from the sequester will exacerbate the problems of a system that’s already woefully underfunded. While the legislature will likely restore some spending, it will still be billions short of previous levels, even as more needy children are entering the school system. Furthermore, low-income kids won't just be shouldering the sequester cuts at school. As many as 7,000 children could lose their place in Head Start, an early child-care and education program that would lose $43 million in Texas under sequestration. Around 9,700 fewer children will receive vaccinations for basic diseases. It's a scary time for poor families.

As just about everyone keeps pointing out, there’s still time to fix these cuts. But Texas lawmakers are in an awkward position. On the one hand, given its reliance on federal grants and the big military bases here, Texas will be among the states hardest hit by the sequester cuts. Yet many conservative legislators in the state are loathe to go to Washington and express support for government programs that are at-risk. In a report from a state House interim committee created to look into the impact of sequester, lawmakers wrote the cuts should serve as "a cautionary tale" about expanding state programs that use federal dollars. Governor Rick Perry has already dug in his heels, refusing the billions of federal dollars that the state would gain by expanding Medicaid. Many of the state's key policymakers have proudly pointed to the state's decision to make drastic cuts rather than consider new revenue streams.

But faced with increasing pressure, even anti-spend Republicans might find themselves advocating for more federal dollars. Recently, even Perry has spoken out against the sequester cuts. "Come on, in a three point however many trillion dollar budget, you can't find 85 billion that's not going to shut down border security, or put our military men and women in jeopardy, or lose a thousand teachers from the classroom?" Perry said. Who knew a President Perry would have been so gung-ho about compromise?