The “fiscal cliff” is that combination of federal spending cuts, expiring Social Security tax reductions and changes to the length of time that an individual can collect unemployment benefits, officials said.
The impact to the everyday functioning of the city is expected to be minimal because of a low reliance on federal funds, City Manager Mark McDaniel said Wednesday.
But the individual Tyler resident may see some changes in his paycheck — in the form of a little less take-home pay and cuts to entitlement programs such as Medicare and Medicaid, said Tom Mullins, president and chief executive officer of the Tyler Economic Development Council, which the city contracts with for economic development.
And those changes might mean that people are less likely to spend, Mullins said Wednesday.
“The general problem of the fiscal cliff on business and the economy is the fact there is so much unknown with the economy,” said Mullins, also the president and CEO of the Tyler Area Chamber of Commerce.
He said people are waiting to see what costs they may face with healthcare and possible cutbacks to Social Security. “So much of the economy is driven by the federal budget — the largest payroll in East Texas is Social Security,” Mullins said, adding that the amount is about $40 million a month.
Social Security payroll taxes were reduced in 2010 from 6.2 percent to 4.2 percent to get people to spend more in take-home pay, but it puts less money into a system that is currently going broke, Mullins said.
The city could be impacted if consumers stop spending, and sales tax revenues would be reduced Mullins said. “And if companies reduce staff or put off expansion projects, all of those things would have a negative impact on revenues coming into the city of Tyler,” Mullins said.
John Moore, spokesman for Trinity Mother Frances Hospitals and Clinics, said in response to Mullins’ comments that he doesn’t know how such cuts might affect his institution.
“I believe all Americans are hoping that our elected officials will do what it takes to make sure that all facets of our economy are taken of.”
East Texas Medical Center was contacted too late for comment Wednesday, an ETMC spokeswoman said.
Dr. Harold Doty, dean of the College of Business and Technology at The University of Texas at Tyler, agrees with Mullins and said that in the long run the “fiscal cliff” won’t affect cities as much as individuals because of the impact on their paychecks.
“The average city receives about 3 ½ percent in its budget from federal funds — which is only about 1/3 of 1 percent on average for a city,” Doty said Wednesday.
A city such as Tyler is in better shape to withstand federal cuts better than many larger metropolitan areas, because there is not a huge budget in such areas as low-income housing and transportation subsidies, Doty said.
Cities such as Killeen in Bell County, along with the Killeen Independent School District, may be impacted a little more severely by the fiscal cliff because of the expected federal budget cuts to military spending.
The city is home to Fort Hood, a United States Army base. The city population, 130,018, is close in size to Tyler.
“It (military tax cuts) would have an impact on the city of Killeen because of the 47,000 soldiers assigned to Fort Hood, but I can’t quantify what the impact would be,” said John Crutchfield, president and chief executive officer of the Greater Killeen Chamber of Commerce.
Crutchfield said he expected that there would be some reduction in military spending because of the wind down of the wars in Iraq and Afghanistan. But he said he felt confident after he and other city leaders recently spoke with Army leaders.
“We were told that all installations would be nicked but that Killeen would not be nicked as much as others,” Crutchfield said. He added that he and other Killeen officials felt good about that.