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Fallin: States need flexibility for fiscal cliff

Tim Talley, Associated Press

OKLAHOMA CITY (AP) -- Oklahoma Gov. Mary Fallin said Thursday the state will feel the impact of the federal fiscal cliff's combination of deep spending cuts and tax hikes and urged officials to give states more flexibility in how they spend federal revenue to deal with the consequences.

Two days after Fallin and other members of the National Governor's Association's executive committee met with President Barack Obama and other federal officials, Fallin said the nation's governors need more flexibility in how they allocate federal funds if spending cuts kick in early in 2013.

"We told the president that we as states understand that we have to reduce our deficit. And we are in support of that. We think it's important for our national security and our economic security," said Fallin, vice chair of the NGA.

But if federal spending cuts go into effect, states need flexibility from federal mandates about how the remaining federal money they receive can be spent to avoid interruptions of vital public services like education and health care.

"Give us some flexibility," Fallin said. "As states, we all have unique circumstances. We all have different budgets, different unemployment rates. We have different strengths, weaknesses in our economy."

The governor said the federal government funds at least 40 workforce programs nationwide that could be affected by federal spending cuts.

"Send the money down to the states for workforce initiatives, but let us determine the best way to consolidate some of those services so we can get more efficiency," Fallin said.

Fallin, who served two terms in the U.S. House before she was elected governor in 2010, said falling off the fiscal cliff will create holes in the budgets of every state. She said Oklahoma will lose an estimated $137 million in federal funding, including $50 million for education and $40 million for health care as the state prepares to comply with new mandates in the federal health care overhaul law.

"We have shared concerns that if they don't resolve the fiscal cliff, that would be a huge detriment not only to our states and our economies and jobs and our revenue, but certainly for our nation," she said.

Fallin said stalled negotiations over avoiding the fiscal cliff are already having an impact in the state as businesses put off major spending decisions because of uncertainty about what will happen in Washington, D.C.

"We're seeing some pullback from the private sector," she said.

Fallin said Oklahoma could lose as many as 8,000 jobs in the aerospace and defense industries if federal spending cuts kick in. Oklahoma is home to five military bases and the aerospace industry is one of the state's largest employers. Businesses that rely upon their economic activity, like office supply stores and hotels, will also feel the pinch.

Meanwhile, the governor said the uncertainty is complicating her efforts to prepare an executive budget for the upcoming year.

"I am preparing our budget and our legislative agenda right now. But it's hard to prepare a budget without knowing what's going to happen in Washington," Fallin said.

Fallin said she has instructed her staff to prepare the budget using figures currently in place for federal funding of state services. Those figures will have to be altered if federal spending cuts kick in, she said.

The executive budget must be in lawmakers' hands next month. The 2013 legislative session begins on Feb. 4.