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As the federal government works to avoid the “fiscal cliff” the effects will trickle down to the states, which will see a decrease in federal aid. 

Decrease in federal aid to state programs will only intensify an already poor situation according to Matthew McCubbins, University of Southern California provost professor of business, law and political economy.

“State public employee pensions are doing quite poorly, public universities and school systems have been cut back, money to restore these items was lacking before, it will only get worse,” said McCubbins.  “In many states, school enrollments are down, which will lead to further school cuts.” 

However, it is also possible that state’s apprehension of loosing federal aid is premature. Fred Silva, senior fiscal policy advisor at the State Budget Crisis Task Force said that is likely that Congress will continue to delay the process of budget cuts for as long as possible. 

McCubbins predicts that Congress will postpone any drastic measures until this coming summer.    

“It seems likely that they'll kick the can down the road at least for a few months perhaps until the summer, so, probably no cuts for this fiscal year. They'll just reach an agreement that is pretty close to what they have now and live with it until summer when a new budget will be needed,” he said. 

Even if the process can be delayed, individual states seek a voice in determining where the budget cuts will come from. According to McCubbins, as Democrats gain influence in the U.S. Senate and with President Obama winning reelection, public employee unions will have a bigger voice now than in the past two decades.  

However, state governments are still concerned about the process. As reported by the New York Times, The State Budget Crisis Task Force cites an absence of formal dialogue between the federal governments as a danger. 

 In a recent report the organization states: 

“There are no standing structures and procedures within the federal government for analyzing the impacts on states and localities of reduced federal spending or federal tax changes, and there is little dialogue about these issues between the federal government and state and local governments.”

The California Report for the State Budget Crisis Task Force calls for the need to reexamine the relationship between the federal government and the states in order to contend with the “apparent growing gap between states’ spend obligations and their available financial resources.” 

The organization suggests creating a program similar to the Advisory Commission on Intergovernmental Relations, which was active from 1959 to 1996. 

Tension is likely to build between state and federal governments as the two groups contend with the effects of tax cuts set to expire at the end of the year, as well as the potential for rolling over the “fiscal cliff.”  

Reach Staff Reporter Emily Goldberg here.