Federal impasse could cast uncertainty on state's economy

2011-07-28T20:00:00Z 2011-07-28T23:15:06Z Federal impasse could cast uncertainty on state's economyBy JoANNE YOUNG / Lincoln Journal Star JournalStar.com

First things first.

"The federal government is not going to default," says Gerry Oligmueller, Nebraska state budget administrator, of the Tuesday deadline for raising the country's debt ceiling and the accompanying possibility of the United States running out of money to pay.

But in terms of how such a possibility might affect Nebraska, here's the second thing: it's mostly speculation.

One thing is fairly clear. State agency directors shouldn't assume that any additional state money will be available to replace federal funds, should they disappear, Oligmueller said.

That's what he told state agencies in April, in a memo on a possible temporary federal government shutdown. It remains true, he said.

Individual state agency administrators have the responsibility to manage their federal grants, he said. And they are paying attention to decisions being made, how programs will be affected, and planning accordingly.

Federal funds make up about a third of the state budget. This year, the state expects about $2.6 billion.

State agencies that get federal grants include Health and Human Services, Education, Roads, the Department of Labor and others.

Mike Calvert, the Legislature's fiscal officer, said there's no way of knowing what process the federal government would go through in case of default to figure out what bills would be paid -- or not paid -- and when.

But grants to the states likely would be hit hard.

State budget officials are mostly concerned about what the effect of an impasse -- and the threat of a default -- would have on the economy and its recovery from recession.

Sen. Lavon Heidemann, chairman of the Legislature's Appropriations Committee, said the economy still is "very fragile."

Nebraska's tax collections have been on the upswing in recent months. A report to the Tax Rate Review Committee this month showed actual receipts for the past fiscal year were $62.7 million over what was forecast in April by the Nebraska Economic Forecast Advisory Board.

State officials don't want to see the uncertainty of what is going on in Washington hurt the recovering economy.  

"If you start going in the wrong direction, you never know where you're going to end up," Heidemann said.

Reach JoAnne Young at 402-473-7228 or jyoung@journalstar.com -- You can follow JoAnne's tweets at twitter.com/ljslegislature.

 

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