Ozarks braces for sequester

Unlike the well-worn marketing line for Las Vegas, what doesn’t happen in Washington, D.C., doesn’t stay there. Inaction in the nation’s capital has created impacts that are reverberating around the country and throughout the Ozarks.

On March 1, automatic spending cuts known as the sequester went into effect for the Department of Defense and other arms of the federal government. Locally, the cuts have caused workers at Wilson’s Creek National Park, Nixa Public Schools and the U.S. Medical Center for Federal Prisoners in Springfield, among others, to prepare new and depressed budget plans.

The sweeping cuts – $85.3 billion in 2013 alone – is a result of Congress’ failure to agree on a path to fiscal responsibility, according to Missouri State University political science professor Mark Rushefsky.

Originally part of the Budget Control Act of 2011, the threat of sequester was designed to force a long-term solution among Republicans and Democrats tired of regularly raising the debt ceiling. The largely indiscriminate cuts served as incentive to reduce federal spending by $1.5 trillion between 2013 and 2021. When the cuts shared a deadline at the end of the year, with the expiration of Bush-era tax cuts and other increases in taxes, it was dubbed the “fiscal cliff,” but Congress extended the deadline on the sequester to March.

“The idea was that cuts would be so significant and across-the-board that it would force the different sides to come together and do something. It hasn’t quite worked out that way,” Rushefsky said.

Half of the cuts, about $43 billion, are in DOD spending. Discretionary spending, or expenditures set annually by Congress for priorities such as federal prisons and education, was reduced by $29 billion. A 2 percent cut in Medicare spending – roughly $10 billion – is part of the sequester, as is another $4 billion in automatic cuts from other mandatory programs, according to the Office of Management and Budget.

While $85 billion is being withheld from sectors of the federal government, the move only reduces the budget deficit this year by $42 billion, according to the Congressional Budget Office, because many disbursements would have occurred after fiscal 2013.

Also, most mandatory federal programs such as Social Security and Medicaid are exempt from the cuts; however, some such as the Women, Infants and Children program are not exempt.

Trickling down
In Joplin, EaglePicher Technologies LLC President and CEO Randy Moore said the sequester has been on the company’s radar.

“You can say we’re nervous about it, that’s for sure,” Moore said, noting sales to defense contractors represent about 75 percent of the company’s annual revenues.

Moore said EaglePicher, a division of Cleveland-based OM Group Inc. (NYSE: OMG) that manufactures batteries and energy storage solutions for civilian, medical, defense and aerospace customers, experienced slowing sales in late 2012.

“We have been seeing a reduction in our defense orders that we’ve been monitoring very closely,” he said, declining to disclose revenues. “We’re not sure what the percentage of the falloff will be or if there will be any labor ramifications at this point.”

One of the organizations that might be most impacted by the sequestration locally is Springfield’s U.S. Medical Center for Federal Prisoners, which is managed by the Federal Bureau of Prisons. According to the Department of Justice, the Federal Bureau of Prisons’ budget is shrinking by $338 million, while the number of inmates in custody remains at 218,000.

“All of BOP’s staff are subject to possible furlough due to the sequestration cuts,” the Justice Department said in an emailed statement to Springfield Business Journal. “To the extent possible, BOP will schedule the potential furloughs to minimize the disruption within the prison facilities and will always maintain a minimum level of staff for security purposes.”

The airports in Branson and Joplin are among five in Missouri and 100 nationwide on a Federal Aviation Administration list of those facing the threat of a tower closure due to cuts of some $600 million managed by the FAA. According to FAA.gov, the closures could begin as soon as April 1 – just weeks after Southwest Airlines is scheduled to begin running flights through Branson Airport.

In the public schools, grants available through the federal government to support Title I–III programs are being slashed by roughly 5 percent. The Title programs support teachers and aides at schools where students and parents depend heavily on the free and reduced school lunch programs, students in the juvenile detention system, and students where English is a second language. At Springfield Public Schools, that means a reduction in the fiscal 2013 budget of $414,500, according to Brian Hubbard, director of federal programs for the district. The Springfield R-12 School District’s Title I program would be most impacted, with a reduced budget of $340,000 for the program that supports 115 teachers, Hubbard said.

In Nixa, the cuts amount to $43,747.  

Hubbard said because the cuts were anticipated, the district would avoid letting any teachers go this year, though he believes it may lose some through attrition.

“Anytime we are dealing with these federal programs, there is a little bit of uncertainty from year to year,” Hubbard said. “But it is worrisome looking into the future.”

Nixa Public Schools Director of Federal Programs Josh Chastain said the effect the cuts would have on the district is muted in the short-term because of normal delays in funding. What worries him is the long-term outlook. “Very rarely is anything given back once it is taken,” Chastain said.

Political posturing?
According to state-by-state impacts prepared by President Barack Obama’s administration prior to March 1, 8,000 civilian DOD employees in Missouri would face furloughs to reduce gross payrolls by $40.3 million; Missouri would lose $11.9 million in funding for primary and secondary education, putting an estimated 160 teaching and teacher’s aide positions at risk; Head Start and Early Head Start services would be eliminated for roughly 1,200 children statewide; and Missouri would not receive $3.7 million in environmental support for clean water and air efforts.

Rushefsky said the White House estimates could, to some degree, be seen as political posturing and the real effects may be different. Obama was scheduled this week to meet with congressional Republicans on Capitol Hill.

Wilson’s Creek National Battlefield Superintendent Ted Hillmer said its $3.2 million fiscal 2013 budget – which includes funds tied to the Heartland Network and Inventory Monitoring Program – would be reduced by $162,000 this year.

He said there would be no furloughs locally, but open positions would not be filled, several seasonal employees would not be hired and a youth summer program would be eliminated. Also, those at the Civil War battlefield would be spread thin in supporting programs for visitors and in maintaining its 33 buildings, 10 miles of trails and six miles of roads.

“We are fortunate, I think, in that we’ve been prudent with our funds,” Hillmer said of sidestepping furloughs. “We knew what could happen.”

Joplin Tri-State Business Journal reporter David Mink contributed to this story.