Whether they stem from President Barack Obama’s proposals to reduce the national debt or the recently formed congressional “supercommittee,” spending cuts are imminent, and states are scrambling.
Gov. Mary Fallin on Thursday told Bloomberg that Obama’s plan could mean cuts to military spending, hurting Oklahoma’s economy. Fallin also criticized potential cuts in federal education and transportation aid, which might be targeted by the Joint Select Committee on Deficit Reduction, which is looking for ways to trim $1.5 trillion in federal spending over 10 years.
About 5.7 percent of personal income in Oklahoma in 2009 came from federal civilian and military spending, Bloomberg reported, citing figures in the state’s most recent Comprehensive Annual Financial Report. Manufacturing, some of which is military, comprised 8.2 percent of personal income that year.
So how vulnerable is Oklahoma to cuts in federal spending cuts?
The U.S. Census Bureau’s Consolidated Federal Funds Report offers a little perspective:
When it comes to reliance on federal funding, Oklahoma is in the middle of the pack. The state ranks No. 26 in total federal aid, according to figures compiled with data from FY2009, which includes direct federal payments and money for grants, retirement and disability, salaries and wages, and procurement.
As the Washington Post‘s Suzy Khimm points out, some of the major sources of this federal funding — Medicaid, Social Security and other low-income benefits, for example — are likely immune to political wrangling.
If major deficit reductions come down the pike, the states that are most dependent on federal aid could see their credit ratings fall.
The most vulnerable states, Khimm writes, are those that are both dependent on federal aid and have a negative credit outlook. Taking into account federal aid and ratings from S&P, Arizona and Maine are in the worst shape.
With its AAA rating and low dependence of federal aid, things are looking good in Delaware. Oklahoma currently has a AA+ rating from S&P.