Region leaders hoping for federal spending cuts compromise

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Photo - The Pentagon (ThinkStock photo)
The Pentagon (ThinkStock photo)
Local,DC,Liz Farmer

The region's leaders say they've prepped their 2013 budgets for what will be hundreds of millions of dollars in lost revenue if federal spending cuts start in January. But they are also holding out hope those cuts -- and the devastation they say it would bring to the region -- never come.

"It's like Hurricane Sandy -- there's only so much you can do with powers beyond your control," said Maryland Senate President Thomas V. Mike Miller Jr. at a Greater Washington Board of Trade panel discussion Thursday.

He added that spending cuts will likely mean a loss of up to 60,000 jobs and $250 million in revenue in Maryland next year.

Under the axe
Budget cuts are coming to most federal agencies and their special funds that provide money to state programs.
Budget category Example Percentage cut    
Defense discretionary funding military bases, R&D 9.4%
Defense mandatory spending all defense agencies 10%
Nonexempt, nondefense discretionary funding AIDS assistance, Head Start 8.2%
Nonexempt, nondefense mandatory funding all other agencies 7.6%
Medicare Health care for seniors 2%

"If the federal government is going to choose to do that to us, we're going to ... take the appropriate steps, but at the present time, we're going to just hope against hope it doesn't happen," he said.

In the District and Virginia, the sentiment is much the same: Leaders have accounted for the financial hit, but they hope to be pleasantly surprised.

"I want to be optimistic because I just can't believe that our leadership will allow this to go on," said D.C. Mayor Vincent Gray, adding that the uncertainty would also hinder the retail economy during the holiday. "I'm hopeful they'll reach across the aisle, work with one another -- because everybody loses if they don't."

Gray said D.C. has braced for a loss of $110 million in revenue in 2013 if the planned federal cuts go through as outlined. The cuts are a result of failed talks between congressional leaders on how to cut the nation's deficit so $1.2 trillion in federal spending will be cut over the course of 10 years, starting with $110 billion in 2013.

Gray said the city might have to dip into its savings fund if the economic impact to D.C. is worse than anticipated.

"The fund balance is there for a rainy day, and that clearly would be a rainy day," he said. "But we'd have to do that in a very prudent fashion."

Virginia Gov. Bob McDonnell ordered agency heads on Thursday to prepare for a 4 percent reduction in department spending if the cuts go through. McDonnell also set up a contingency fund this year with $60 million to help close budget holes caused by federal cuts.

Virginia state Sen. Dick Saslaw, who represents eastern Fairfax County, said he believes the "rank-and-file public is not that concerned about this yet," even though economists have predicted sequestration cuts could cost the state 207,000 jobs, two-thirds of those from defense cuts alone.

"I think they view it as a concept now that hasn't hit home," he said. "It will hit home as it gets closer, but I don't think it has yet."

Examiner Staff Writer Steve Contorno contributed to this report.

lfarmer@washingtonexaminer.com

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