National Legislation 2013: Effect on Local Government

Alabama County Government InstituteJune 6, 2013

Federal Policy Agenda

Snapshot of Pending County Issues

White House/OMB and Federal Agency Regulatory Review

Affordable Care Act and Impact on Counties

FY2014 Federal Appropriations Aid to State & Local Govts.

Immigration Reform and County Impact

PILT and Secure Rural Schools Funding and Extension

Marketplace Fairness Act (Existing Remote/Online Sales

Taxes)

Multi-Year Farm Bill Reauthorization

Workforce Investment Act (WIA) Reauthorization

MAP-21 Highway and Transit Reauthorization

Timeline

Key Issues and Timelines

Sequestration in Effect: Across-the-Board Cuts (Began March 1, 2013)

FY2013 Federal Appropriations: Process Completed for FY2013

President's FY2014 Budget: Release Delayed Until April 10, 2013

FY2014 Appropriations Process: Congress has Started

Tax and Entitlement Reform: Congressional Hearings have Started

Federal Debt Ceiling Deal: Debate Delayed to Fall 2013

Unemployment Rate Continues Downward Trend

Source: Bureau of Labor Statistics, April 2013

Federal Budget Picture

Budget Deficit Has Hit Record Highs in Past Five Years

Source: Congressional Budget Office, May 2013

Federal Budget Picture

GAO Projections for State and Local Governments

Fiscal sustainability presents a national challenge shared

by all levels of government.

According to the GAO, state and

local sectors face persistent and long-term fiscal

pressures. Absent policy changes,

there is a growing gap

between receipts and expenditures

in future years

Federal Budget Picture

Political Context

Public Skeptical on National Outlooks

Source: NBC/WSJ Pol, April 2013

Political Context

Congressional Approval Hovers Near Three-Decade Low

Source: Gallup.com, March 2013

Political Context

President Obama’s

approval ratings have remained

solid—he has not yet recorded a

steady approval rating under 40

percent, something that every president since Nixon has

done

Political Context

White House Agenda Distracted by Scandals

IRS Issues

Benghazi Attack

DOJ Secretly Acquiring AP Reporter Phone Records

This triple play is likely to lead to months of hearings and

may delay White House momentum on any of its other

agenda items, including reaching some kind of grand

bargain on deficit reduction or jobs bills

Federal Policy Agenda

Entitlement Reform Medicaid cuts and cost shifts to states and

counties

Tax Reform Elimination/reforms to tax-exempt municipal

bonds Elimination of state and local property,

income and sales tax deductions on federal income tax forms

Sequestration and Annual Appropriations Federal aid cuts to state and local

governments

Triple Threat of Issues Facing Counties

Federal Budget Picture

Source: Congressional Budget Office, 2013

In the Long Term, CBO Projects Over $25 Trillion in Entitlements Expenditures

Entitlements Are Still on the MenuHealth care spending has slowed

BUT entitlement spending is still driver of deficit and debt

MedicaidMedicare and Social Security are 100% federal

Medicaid financing and administration is federal, state and county

Counties are required to provide health care for low income,

uninsured or underinsured residents in 32 states

There are 964 county hospitals and 647 county nursing homes

serving Medicaid beneficiaries in communities nationwide

Additionally, counties put up part of the non-federal match for

Medicaid in 22 states.

House FY2014 budget changes Medicaid to block grant

The President’s FY2014 budget basically leaves Medicaid alone

Entitlements

Entitlements: Risk?

Entitlements: Risk?

Affordable Care Act

Affordable Care Act

Affordable Care Act

Municipal BondsProposals to Alter the Tax-Exempt Status of Municipal Bonds Continue to Remain a Threat to County Government

2010

• Simpson-Bowles: Proposed elimination of all income tax expenditures; interest earned on state and local municipal bonds would be fully taxable for newly-issued tax exempt municipal bonds

2012

• President’s FY2013 Budget Proposal: Proposed placing a 28 percent limit on the value of specified deduction or exclusions from AGI and all itemized deductions; the limit would apply on interest earned for new and outstanding state and local tax exempt bonds

March 2013

• FY2014 Senate Budget Resolution: Suggested the possibility of a cap being placed on tax expenditures, which could include the exemption for interest earned on state and local municipal bonds

April 2013

• President’s FY2014 Budget Proposal: Reiterates 28 percent cap on the value of certain tax benefits, including interest earned on new and outstanding state and local tax exempt bonds

Municipal Bonds

Major Coalition Letter to Senate Leaders: NACo/NLC/USCM led a major coalition to Senate leaders urging them to protect municipal bonds as they consider the FY2014 Budget Resolution. Almost 60 major groups have signed on

Sen. Begich (D-AK) Letter to President Obama: Sen. Begich led a letter in the Senate urging the Administration to protect the tax-exempt status of municipal bonds in the ongoing debt and deficit negotiations

Senate Finance Committee Working on Tax Reform: The Senate Finance Committee, led by Chairman Max Baucus (D-MT) and Ranking Member Orrin Hatch (R-UT), are meeting regularly to discuss options for tax reform

MULTIPLE MOVING PARTS: THE SENATE

Municipal Bonds

MULTIPLE MOVING PARTS: THE HOUSE

House Ways and Means Committee Established Working Groups to Tackle Tax Reform: 11 working groups gathered information and data on topics related to tax reform and have submitted to the Joint Committee on Taxation who have compiled information for report to Ways and Means Committee

House Ways and Means Committee Hearing on Tax Reform: Hearing held March 19, “Tax Reform and Tax Provisions Affecting State and Local Government”

Reps. Terry and Neal Lead House Resolution to Support Muni Bonds: H.Res.112, introduced by Reps. Lee Terry (R-NE) and Richard Neal (D-MA), celebrates the importance of municipal bonds; co-sponsors needed (61)

Rep. Dutch Ruppersberger (D-MD) Leading Letter to House Leadership to Support Municipal Bonds

Senate Votes in Favor of Internet Sales Tax Bill

Source: National Journal

Marketplace Fairness Act

Marketplace Fairness Act

Moving Forward

Successful Senate Vote (69 – 27)

Moves to House Judiciary Committee

House Leadership not against moving, but different version

than Senate

Current House bill has 65 cosponsors; nearly half are

Republican

Farm Bill Reauthorization

Farm Bill Timeline

Source: National Journal

Farm Bill Reauthorization

Challenges Moving Forward

Senate is currently considering this week on floor; House

leadership has promised to give the bill floor time by summer

If the House and the Senate stick to this schedule, there will

be enough time for the two chambers to negotiate a

compromise and pass a final bill by September 30, when the

current Farm bill extension expires

Continued major differences over Supplemental Nutrition

Assistance Program (SNAP)

Immigration

Ongoing Immigration Debate

SENATE HOUSE PRESIDENT

“Gang of Eight” U.S. Senators released

the Senate’s comprehensive

immigration reform bill on April 17th. The

Senate Judiciary Committee passed S. 744 this week

It was reported on May 16th that key House members have reached an

agreement on comprehensive

reform principles. Few details are available at this

point

A draft of the President’s

immigration reform proposal was leaked

on February 16th, but is unlikely to

become a bill unless Congress gridlocks

FY2013 CR

Signed into law March 26, 2013

Ordinarily, a CR pro-rates funding for federal agencies and

programs at the prior year’s level for a short period, but this CR

locks in the $85 billion in sequestration or the automatic, across-the-

board cuts

It also contains some spending adjustments that give certain federal

agencies (i.e. DOD, USDA, VA, Commerce, Homeland Security and

Justice) flexibility to implement the across-the-board sequester cuts

FY2013 Continuing Resolution (P.L. 113-6)

Sequestration

Sequestration: FY2014 through FY2021

Source: Center on Budget and Policy Priorities

For discretionary programs funded through the annual appropriations process, sequestration works very differently after FY2013

Instead of Congress enacting appropriations bills at levels that do not breach the existing discretionary caps and the President then ordering an across-the-board sequestration of the funding provided by those bills, the law requires that the sequestration of discretionary programs be implemented up front through reductions in the defense and non-defense discretionary caps themselves

House and Senate Appropriations Committees will determine how to fund each agency and program within those reduced caps

President’s FY2014 Budget

Eliminates Justice Department’s State Criminal Alien Assistance Program, funded at $216 million in FY2012 and $220 million in FY2013

Eliminates DHS State Homeland Security Grants, funded at $294 million in FY2012 and $285 million in FY2013; Would be replaced with new consolidated National Preparedness Grant Program

Cuts HUD’s Community Development Block Grants (CDBG) by $280 million, down from $2.94 billion in FY2012 and $2.80 billion in FY2013

Cuts HUD’s HOME Program to $945 million, from $1 billion in FY2012 and $950 million in FY2013

Cuts HHS Community Service Block Grants to $350 million, down from $677 million in FY2012 and $642 million in FY2013

Increases DHS Second Chance Act Programs and Research to $119 million, from $58 million in FY2013

Increases HHS Head Start program to $9.62 billion, from $8.01 billion in FY2013

Increases DOT Essential Air Service to $246 million, from $183 million in FY2013

Noteworthy Changes

President’s FY2014 Budget

President’s 2014 budget proposes to extend mandatory funding for PILT at $410 million, an increase of $8.8 million from FY2013

The President’s FY2014 budget also proposes an independent public evaluation of PILT to review the program, in both concept and practice, with a goal of developing options to put the program on a sustainable long-term funding path

Payment in Lieu of Taxes Program (PILT)

President’s FY2014 Budget

President proposed a five-year reauthorization of the Secure Rural Schools Act (starting in FY2013), with funding through mandatory appropriations

FY2014 payment is proposed at $278 million, a reduction of $68 million from FY2012 levels

The Forest Service has recently proclaimed that funds already distributed under the most recent extension of the Secure Rural Schools and Community Self-Determination Act (SRS) or payments based on revenue generated in FY2012 are subject to the FY2013 sequester, and the agency will be requesting repayment of $17.9 million in SRS and 25% fund payments that have already been disbursed to States

The National Governors Association, NACo and more than 50 members of Congress have questioned OMB and USDA over the legal authority of applying the Budget Control Act (BCA) and American Taxpayer Relief Act (ATRA) sequestration cuts to FY2012 SRS payments

Secure Rural Schools & Community Self Determination Act

Budget and Appropriations

FY2014 Budget and AppropriationsThe House caps discretionary spending at $967 billion; leaves sequester intact

The Senate caps discretionary spending at $1.059 trillion; repeals sequester

The not so small problem moving forward is that the two budgets are $91 billion dollars apart compromise is unlikely

Without an agreement, it is unclear how many of the annual bills will move to the floor; given the major differences, continuing resolutions are likely

House Appropriations Chairman Hal Rodgers (R-KY) has begun to move FY2014 bills through subcommittee: Milcon-VA and HS have passed full committee

Senate Appropriations Chairman Barbara Mikulski (D-MD) aims to move the FY2014 spending bills through the committee before August recess. This week, she plans to meet with subcommittee chairmen to discuss spending amounts in each of their respective bills (these are known as 302(b) allocations)

Federal Budget Picture

Source: National Journal

Budget Proposals Highlight Partisan Divide

Legislative Analysis

DON’T MISS NACo’s 2013 ANNUAL CONFERENCE!Network with your peers and explore new innovations, trends

and emerging practices in county government!

REGISTRATION NOW OPEN AT WWW.NACO.ORG

About NACo

The National Association of Counties (NACo) assists

America's counties in pursuing excellence in public service

by advancing sound public policies, promoting peer learning and

accountability, fostering intergovernmental and public-private

collaboration, and providing value-added services to save

counties and taxpayers money

Founded in 1935, NACo provides the elected and appointed

leaders from the nation's 3,069 counties with the

knowledge, skills, and tools necessary to provide fiscally

responsible, quality-driven, and results-oriented policies and

services for healthy, vibrant, safe, and fiscally resilient counties

For questions or more information, feel free to contact us

Contact Us!

Questions?

Deborah Cox: Legislative Directordcox@naco.org or 202.942.4286

Paul Beddoe: Health pbeddoe@naco.org or 202.942.4234

Michael Belarmino: Finance & Intergovernmental Affairs mbelarmino@naco.org or 202.942.4254

Daria Daniel: Community and Economic Developmentddaniel@naco.org or 202.942.4212

Bob Fogel: Transportation bfogel@naco.org or 202.942.4217

Deseree Gardner: Labor and Employment dgardner@naco.org 202.942.4204

Erik Johnston : Agriculture and Rural Affairs ejohnston@naco.org or 202.942.4230

Ryan Yates: Public Lands ryates@naco.org or 202.942.4207

Julie Ufner: Environment, Energy & Land Use jufner@naco.org or 202.942.4269

Yejin Jang: Telecommunications and Technologyyjang@naco.org or 202.942.4239

Matthew Chase, NACo Executive Director

mchase@naco.org

NACo was named one of nine remarkable associations in the United States after a four-year study conducted by the American

Society of Association Executives and The Center for Association Leadership because of its commitment to members and

purpose

25 Massachusetts Avenue, N.W. ▲ Suite 500

Washington, D.C. 20001

202.393.6226

www.naco.org

NACo was named one of nine remarkable associations in the United States after a four-year study conducted by

the American Society of Association Executives and The Center for Association Leadership because of its

commitment to members and purpose.