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Sen. Scott Newman of Hutchinson asks State Budget Director Margaret Kelly on Friday about her report indicating Minnesota will lose millions of dollars in federal funding. Forum News Service photo by Don Davis

Minnesotans see impact of sequestration

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ST. PAUL — The federal government’s failure to agree on how to fix its debt problem could cost Minnesota more than $90 million this year.

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Early numbers show schools and health programs could be among those most affected, a legislative committee learned Friday.

Still, many questions remain, such as when funds will be cut, what restrictions will be placed on state agencies and just how much money will be lost.

The committee, composed of legislative leaders and financial chairmen, heard from their fiscal experts and the state budget director, but did not get all the answers they want.

“There are a lot of unknowns that remain,” Budget Director Margaret Kelly said.

While preliminary numbers from Washington show Minnesota losing $90 million, the number will be higher, Kelly said. “The final amount of reduction is unknown.”

Rep. Diane Loeffler, DFL-Minneapolis, said the consequences could be severe. Sixty percent of the state Health Department’s budget comes in federal funds, she said, so the ability to respond to emergencies could be severely impaired.

For schools, House fiscal analyst Bill Marx said, the impact could be a loss of $10 million from special education programs and nearly $2 million from a program to improve teacher quality. Another $13 million that local education agencies expected may not appear.

Head Start funds for young children also would be cut.

Lots of health and human services programs also would be trimmed if Congress and the president do not resolve their differences quickly.

Medicaid administration would lose $35 million. Medicaid, which Minnesota calls Medical Assistance, funds health care for the poor.

Half of a children’s insurance program would be chopped, costing the state $11 million.

The Medicare cuts would especially hurt rural hospitals because a higher percentage of their patients are elderly, hospital lobbyist Mary Krinkie said.

The 2 percent Medicare cuts to health care providers — including hospitals and doctors — come at a time when hospitals fear state lawmakers will add a surcharge on their bills.

In rural hospitals, more than half of the patients receive federal Medicare payments, Krinkie said.

In previous Medicare cuts, she added, rural hospitals were exempt, but not this time.

Since the 2 percent cut just started Monday, Krinkie said it is too early to know how it will affect health care providers.

More than 800,000 Minnesotans are on Medicare, which provides the elderly with health insurance.

Sequestration was written into a federal law designed to force Congress and the president into fixing a soaring debt. But no deal was worked out, so sequestration has begun to make automatic cuts in most federal programs.

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