“fiscal cliffs, sequestration, deficit reduction
TRANSCRIPT
“FISCAL CLIFFS, SEQUESTRATION, DEFICIT REDUCTION
MICHAEL BIRD
SENIOR FEDERAL AFFAIRS COUNSEL
NATIONAL CONFERENCE OF STATE LEGISLATURES
January 7, 2013
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HOUSE AND SENATE WAYS AND MEANS AND FINANCE
COMMITTEES: JOINT ECONOMIC AND FISCAL
ORIENTATION
FOR THE RECORD WWW.NCSL.ORG FOR MORE INFORMATION
COMMENTS AND ANALYSES ARE MINE, NOT REPRESENTATIVE NECESSARILY OF NCSL POLICY
COMMENTS AND ANALYSES BASED ON CURRENT LAW
UPCOMING EVENTS WHERE THIS TOPIC WILL BE REVISITED:
– TO BE SCHEDULED WEBINARS
– MAY 2-4, 2013 SPRING FORUM
– AUGUST 12-15, 2013 LEGISLATIVE SUMMIT
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‘CLIFF’ AVERTED H.R. 8, “THE AMERICAN TAXPAYER ACT”
GENERATES APPROXIMATELY $620 BILLION IN NEW REVENUE OVER 10 YEARS VIA VARIOUS TAX CHANGES
CONTRIBUTES APPROXIMATELY $4.6 TRILLION OVER 10 YEARS TO THE NATIONAL DEBT VIA VARIOUS TAX AND OTHER CHANGES
POSTPONES THE SEQUESTER TO MARCH 1, 2013. COST THAT IS OFFSET: $24 BILLION.
TEMPORARILY “FIXES” MEDICARE PROVIDER REIMBURSEMENTS, EMERGENCY UNEMPLOYMENT COMPENSATION BENEFITS, QI AND TMA PROGRAMS, FARM BILL, VARIOUS TAX CREDITS AND DEDUCTIONS.
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THE LOOMING ’CLIFFS’ OF ’13 February Debt Ceiling
March 1 Sequestration
March 27 Continuing Resolution Ends
February-April President’s ’14 Budget and Congress’ Budget Resolutions
All Year Long Reauthorizations
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SEQUESTRATIONFROM THE BUDGET CONTROL ACT OF 2011: Three components with potential to affect future funding for state grant programs:
Discretionary spending caps w/adjustments (done)
Joint Select Committee on Deficit Reduction (failed)
Sequestration process (forthcoming)
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**August, 2011, deal increases debt ceiling by $2.1 trillion in exchange for the below:
“Pot” 1: $917 billion in discretionary spending ($787 billion without interest savings) over ten years via spending caps.
“Pot 2” 2: $1.2 trillion ($984 billion without interest savings) over nine years.– $492 billion in non-defense discretionary/mandatory spending.– With non-exempt mandatory programs omitted, the reduction
to non-defense discretionary programs would be $44 billion per year.
– $492 billion in defense discretionary spending.
BCA “DEFICIT SAVINGS”
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Discretionary Spending Caps
FY 2010 FY 2011 President House Agreement FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021Security** $683 $689 $719 NA $684 $686 NS NS NS NS NS NS NS NSNon-Security $402 $361 $397 NA $359 $361 NS NS NS NS NS NS NS NS Total $1,084 $1,050 $1,116 $1,019 $1,043 $1,047 $1,066 $1,086 $1,107 $1,131 $1,156 $1,182 $1,208 $1,234
Dollar change from previous year -$34 $66 -$31 -$7 $4 $19 $20 $21 $24 $25 $26 $26 $26Percent change from previous year -3.2% 6.3% -2.9% -0.7% 0.4% 1.8% 1.9% 1.9% 2.2% 2.2% 2.2% 2.2% 2.2%
*Figures exclude funding for overseas contingency operations
Sources: FY 2012 budget for FY 2010 and FY 2012 President; House Budget Committee website for House FY 2012; NGA for FY 2011
FY 2012
Discretionary Spending Limits Under Budget Control Act of 2011*($ in billions)
**Security spending consists of spending from within the departments of Defense, Homeland Security, VA, National Nuclear Security Administration, intelligence community management, and budget function 150 (international affairs).
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“Pot 1" - $917 billion in savings over 10 years from defense/non-defense discretionary spending
What We Can Say About a Sequester- “Pot Two" (non-defense)
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FFY 12 domestic discretionary and mandatory spending that goes to states
SELECTION OF PROGRAMS EXEMPT FROM SEQUESTRATION
Most Transportation Programs
Medicaid (vendor payments and administration)
Pell Grants
Children’s Health Insurance Program
Most child nutrition and Food Stamp programs
Most child care, child support enforcement, foster care and adoption assistance programs
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Programs Not Exempt from Sequestration
Education (elementary, secondary, vocational, higher)
Employment and Training
Energy
Environment
Agriculture/Natural Resources
Justice
Housing/Community Development
Social Services (non-mandatory programs)
Health (non-Medicaid/CHIP programs)
National Forests/Mineral Leasing
Defense
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What We Can Say About a Sequester- “Pot Two" (defense)
Covered65%
35%
Total Funding: $530 billion in FY 2012
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What We Can Guess About a Sequester
FY 2010 FY 2011 FY 2012 FY 2013Total Funding $189.8 $181.0 $176.1 $160.2Annual Change -$8.8 -$4.9 -$15.8Annual Percent Change -4.6% -2.7% -9.0%Cumulative Change -$8.8 -$13.7 -$29.6Cumulative Percent Change (compared to FY 2010) -4.6% -7.2% -15.6%
Potential Impact of FY 2013 Sequester on Selected Discretionary Grant Programs
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Impact of BCA’S Sequestration on NEW HAMPSHIRE- nondefense
“Pot Two“
FFY 2012 - Exempt $1,287,719,000
FFY 2012 - Covered $ 376,672,000
Total $1,664,391,000
Hypothetical FFY 2013 Covered $ 344,197,000
FFY 1013 for covered programs compared to FFY 2012
$ - 32,476,000
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Federal Government Expenditures –New Hampshire-2010
Retirement and Disability $4.3 billion
Other Direct Payments $2.4 billion
Grants $2.3 billion
Procurement $1.4 billion
Salaries and Wages $0.9 billion
TOTAL $11.3 billion
Source: Consolidated Federal Funds Report for Fiscal Year 2010
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Per Capita Federal Government Expenditures, by State, all Categories
New Hampshire $ 8,400 +
USA average $10,000 +
Source: Consolidated Federal Funds Report for Fiscal Year 2010
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New Hampshire - Rank – Per Capita Federal Expenditures - 2010
Retirement and Disability 18th
Other Direct Payments 46th
Grants 44th
Procurement 28th
Salaries and Wages 40th
OVERALL 46th
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WHAT’S DRIVING THIS FISCAL CRISIS?
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SUMMARY OF THE CHALLENGE “$1.00 SPENDING WITH 60 CENTS OF REVENUE (PLUS FOREGONE
REVENUE)
DOZEN + YEARS OF “EMERGENCY” AND “NON-OFFSETTING” FISCAL POLICY VIA BIPARTISAN AGREEMENTS
FOUR STRAIGHT YEARS OF TRILLION DOLLAR + DEFICITS
GREAT RECESSION PLUS EARLY 2000’S RECESSION
SLOWER ECONOMIC RECOVERY THAN HISTORICAL STANDARDS
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Federal Spending By Category
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Nondefense Discretionary Spending2011
Administrationof Justice
20%
16%
15%
11%
10%10%
9%
9%
Other*
InternationalAffairs
Health Veterans' Benefits and Services
Income Security
Transportation
Education, Training,Employment, andSocial Services
R ce: Congressional Budget Office.* Includes funding for natural resources and environment; general science, space, and technology; general government; community and regional development; agriculture; Medicare and Social Security (for administrative activities); energy; and commerce and housing credits.
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MOST OF THIS “STUFF” HAS BEEN NEGOTIATED BEFORE – HERE ARE SOME EXAMPLES
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DEFICIT REDUCTION “NEGOTIATIONS”
President Obama/Speaker Boehner (2011-2012)
Vice President Biden/House and Senate members
Senate “Gang of Six” (44)
House “Gang of 100”
Super Committee of 2011
House FY 2013 Budget Resolution
President’s FY 2013 Budget
Vice President Biden/Senate Minority Leader McConnell
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Common Features Among Reports/Negotiations
Comprehensive in scope– include both spending and revenue
recommendations– put everything or most everything on the table
Bipartisan
Primarily federal policymakers
Missing ingredient: state and local government impact
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Major Areas with Potential Repercussions for State-Federal Fiscal Partnerships
Domestic discretionary spending
Medicaid, Medicare and other mandatory and entitlement programs (provider taxes, DSH, blended rates, unfunded mandates, more)
Federal tax reform (deductibility)
Federal tax expenditures (tax exempt financing)
Social security (mandatory social security participation)
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SOURCES FOR SLIDES:
SLIDES 8-9 Federal Funds Information for the States, NCSL Federal Funds Webinar, January, 2012
SLIDES 15-16 -17, Consolidated Federal Funds Report, FY 2010
SLIDES 20-21-28-29, Bill Hoagland, Bipartisan Policy Center, NCSL Fall Forum, Dec. 2012
All Others, NCSL
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