While analysts and observers continue to digest the components of the recent federal debt limit deal, state and local governments remain uncertain on how much “ripple effect” may reach their level.

From an article published today on Stateline.org, the sequestering of entitle programs may serve as a protection to many state governments:

The most immediate portion of the spending cuts included in the debt deal are only for “discretionary” programs, not “mandatory” entitlement programs such as Medicare, Social Security and, most relevant for states, Medicaid. These reductions take the form of annual caps to discretionary federal spending. The law says nothing about how Congress must meet those caps, other than a requirement that the cuts be balanced for the first two years between security and non-security spending.

The debt deal limits discretionary spending over the next ten years to a level $917 billion under the Congressional Budget Office’s “current law baseline” — the federal government’s expectations for what expenditures would have been without the deal. But in actual dollar terms, the impact will be reduced because the baseline assumes inflation-based spending growth.

For a state like Maryland with a major federal presence (both military and civilian), this may be mixed news at best. The direct federal funding for state-funded government programs like Medicaid may be outside the immediate rounds of cutbacks, but other domestic program reductions could easily have workforce effects in this state.

MACo’s upcoming conference will include a Friday morning discussion on effects of federal budget decisions, featuring Dana Thompson, the Governor’s Director of Federal Relations. Read more about the upcoming conference, where on-site registration will be available.