— Montgomery Advertiser on state fiscal cliff issues:
Alabamians who think the “fiscal cliff” debate is just more hot air blowing around the partisans in Washington that won’t make any real difference down here should think again. The fiscal cliff, that combination of automatic tax increases and sharp spending cuts that kicks in at year’s end if no agreement is reached, is especially precipitous for our state.
Although the impact would be felt in every state, few others would take as big a hit as Alabama. There are several reasons for this, starting with the state’s tax structure.
Alabama allows federal income taxes as a deduction from state income tax liability. Most states — 44 of them — do not. If there is no agreement, current tax cuts will expire, meaning that federal income tax rates will rise. Because Alabamians will be paying more in federal income taxes, they will also be deducting more from their state income taxes, cutting revenue to their already strapped state.
A plunge over the fiscal cliff has other implications for Alabama as well. Defense spending is an important part of the state’s economy. As the Advertiser’s Mary Orndorff Troyan reported, 7 percent of Alabama’s gross domestic product comes from federal spending on defense. That’s twice the national average.
In 2010, federal spending on procurement contracts in Alabama was $10.4 billion. If there is no agreement to avoid the fiscal cliff, that number will drop substantially due to the big cuts in defense spending that will be triggered. National security concerns outweigh local economic concerns, of course, but the impact on Alabama would be no less real.
Other effects, although smaller, would still be felt in Alabama. Automatic spending cuts would cost Alabama $9.8 million and 330 jobs in Head Start programs around the state. That would mean 1,584 fewer spaces for children in a program with a proven record of helping children achieve academic success as they move into grade school.
Alabama would lose $3.3 million from its block grant for child care and development. That would eliminate child care subsidies for 1,253 families, making it harder for parents to work. Title I grants would drop by $18 million, eliminating 248 education jobs, and special education grants would be cut by $14 million.
All of this matters and matters a great deal, which is why Alabamians should not only be closely watching the debate in Congress, but also demanding that the members of the state delegation be a part of the effort to find a solution, not blindly partisan impediments to it.