Federal Funding and States' Rights – What it Could Mean to You

The Federal Government employs over 22 million Americans. That's more than twice the production and manufacturing industries in this country. If President Obama, his top White House financial advisors, and key negotiators from Congress cannot agree upon a budget proposal and sign it into law in the next couple of days, then we will be facing a Federal Government shutdown effective Friday at midnight. The positions in question are only operating on a 3-week budget extension passed two and a half weeks back.

The Key Democrats declined a GOP proposal to keep the Government bodies operating for another week over a disagreement with about $12billion in cuts. Republicans also rejected a Democratic proposal that saw $33billion in cuts for the rest of the fiscal year (ends September 30). The proposal that's drawn the most attention was a Republican offering which cut funding from left-wing programs such as Planned Parenthood and National Public Radio.

If you work for the Federal Government, you know it means you will be missing work without pay until a new budget is approved. The same fiscal stalemate happened in the early 90's under the Clinton administration, and while many Federal employees were forced to miss work, the President and Congress did manage to not only balance the budget, but even generate a surplus. Today, however, the picture is much more pessimistic. Many even fear that we'll start to see issues arise that are matters of states' rights versus federal responsibility. The worst-case scenario is that the Federal Government trims the budget by cutting civil services and passing the fiscal obligation on to State Governments.

For instance, should the Federal Government remove education funding or scholarships, which are currently available, it would become the State Government's responsibility to pick up the slack. That is a potential double-edged sword. Certain states may easily implement new policies to generate revenue for such programs (ex: Arkansas instituting a lottery from which revenue goes towards funding education), but others may have no choice but to increase tax rates or levy new taxes on popular goods and services.

Continuing with the education example, what this means for the individual is that if Christine from Omaha graduated from the University of Nebraska in 2008 with her Bachelors' of Science in Accounting, she could be facing an entirely different financial landscape should she decide to move forward to pursue her <a rel="nofollow" onclick="javascript:_gaq.push(['_trackPageview', '/outgoing/article_exit_link/4548729']);" href="http://www.mbainaccounting.net/">MBA in Accounting</a> in 2011. Another large question mark circles around online education programs. If Christine was to enroll in an online program with a school from another state to pursue that MBA while continuing to work in the job she already had, would the scholarship obligation become a federal concern, since she would technically be involved in interstate commerce, or would the responsibility fall into the state of Nebraska's hands? Would Christine be left to pick up her own tab? Should Christine give up on her dream of continuing her education?

These types of questions, on a large scale are complicating factors when dealing with signing off on a national budget. Now factor in other elements such as police and fire department subsidies, social security and overseas disaster relief. The task is a daunting one.