Local officials, state eye the unthinkable as fiscal cliff deadline approaches

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Potential impact of sequestration, by state. Potential impact of sequestration, by state.

Congress has yet to defuse the time bomb it created last year with the passage of the Budget Control Act, a package of automatic spending cuts and tax hikes that will propel the country off the so-called fiscal cliff if lawmakers can’t agree on budget reduction measures before the end of the year. With the deadline fast approaching, Charlottesville and Albemarle officials are trying to plan for the possibility of massive cuts in a state that would be hit especially hard by sequestration.

Albemarle County receives $16.7 million in federal funding annually, said county spokeswoman Lee Catlin—about 5 percent of its revenues. More than half of that goes into the school budget, which gets about $7 million to support special education, free and reduced lunch, and other programs. Because those programs are mandated, the district would have to find the money for them elsewhere, said Albemarle County School Board Vice Chair Diantha McKeel. And county schools are already running lean.

“It sounds trite to say, but we don’t have a lot of places to go,” McKeel said. The big sequestration question mark also affects the district’s ability to map out its future. “It’s very difficult to do any planning,” said McKeel.

People in the public and private sector all over Virginia are facing the same uncertainty. The Commonwealth ranks second in the nation in federal payroll and procurement dollars, according to Stephen Fuller, a public policy expert at George Mason University and director of the school’s Center for Regional Analysis. Nearly 10 percent of all federal employment pay goes to Virginia residents, and the state sucks up a huge portion of U.S. defense contract spending, Fuller said. Most of that money is concentrated in Northern Virginia and the Hampton Roads area, as Fuller found in a study of the potential impact of the Budget Control Act earlier this year.

That doesn’t mean the rest of the state won’t be hurting. Albemarle County now has a large and growing defense and intelligence industry. It’s home to the National Ground Intelligence Center, a station of the Defense Intelligence Agency, and numerous private companies that have put down roots here, including big names like Northrop Grumman. All would face big cuts, said Fuller, but defense spending isn’t the only thing that would be slashed.

“There are impacts from these cutbacks that are less visible to the citizens of the Commonwealth,” Fuller said. “They come in forms that are more subtle.”

Some may seem more inconvenient than apocalyptic—it will take a lot longer to get a passport, for instance, and smaller regional airports may have to close as air traffic controllers are laid off. But other services we depend on but barely notice will also slow, like port inspection and meat inspection, Fuller said.

And then there’s the ripple effect. Fuller’s analysis puts the total sequestration-related job cuts in Virginia at well over 207,000, and the businesses where those government employees spend their money will suffer too, he said.

The hanging sword is already affecting the state and national economy. Federal agencies—especially those concentrated in Virginia, said Fuller—are holding off on hiring and filling contracts. “The economy is slowing down in anticipation of uncertainty,” he said.

The same uncertainty is plaguing local government, where federal money supports many social safety net programs. In Charlottesville, where schools, social services, and public housing rely heavily on federal funds, the situation could be dire, said City Manager Maurice Jones.

Part of the problem, he said, is that the city would have to plug the holes left by the cuts within its current fiscal year, which ends June 30. “We’d have to eliminate services immediately, or find the money,” he said.

Albemarle County schools spokesman Phil Giaramita said a few factors might help the district avoid catastrophe. Albemarle schools have seen a steady reduction in federal support in recent years, aside from a recent stimulus bump, so the potential hole isn’t that big, he said. And unlike the city, county schools could expect to see the cuts phased in gradually. Still, he agreed that trying to plan for a future that may or may not include big revenue gaps is taxing—and it’s becoming the new reality.

“You think you have it right, and then a week later you’re surprised and starting all over again,” he said.

And that’s the frustrating part, said local officials: Ultimately, the responsibility to keep the wheels from falling off rests with them. Congress may swing the sequestration ax, but it’s local government that must figure out how to keep the pain of the blows at bay. They’re not the only ones worrying.

“A year and a half ago, the rating agencies put all of us on notice for review here in the state of Virginia,” said Jones. Even the triple-A bond-rated communities had to go through a review process “because of the vulnerability of the state when it comes to federal funds,” he said.

Right now, Jones said all he can do is hope for a deal in Washington. “But if it does happen, we’re the ones who have to carry the burden,” he said. “We’re immediately responsible for our citizens.”

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