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Category: Budget

And here comes the NEXT Spending Battle

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Although the FY2019 spending situation has finally been resolved, another potentially protracted spending fight is already underway.  Without an agreement to lift the statutory limits on how much the government can spend during FY2020, the federal government is looking at a very steep fiscal cliff and significant automatic cuts.

In 2011, House and Senate negotiators came up with, and the Obama Administration agreed to, a plan that was considered so potentially draconian that no one thought that parts of the plan would ever be allowed to come to fruition.  The overarching goal of the plan was to cut mandatory spending.  The intent was to force cuts in mandatory spending by imposing automatic cuts (or popularly called “sequesters”) to the discretionary part of the budget– both defense and non-defense– with statutory cuts placed on each part of the discretionary budget for 10 years.

The mandatory savings never materialized, and over the last eight years, sequesters have been avoided only as a result of two-year deals that raised the spending limits imposed on both defense and non-defense discretionary (“NDD”) programs.  The last deal that lifted the cap applied to FY2018 and FY2019.

All of this means that, for FY2020, without an agreement that lifts the statutory limit on discretionary programs, we are facing a mandatory cut of $126 billion below FY2019 levels.  As a result of the 2011 agreement, discretionary defense programs would be subject to a cut of $71 billion while the domestic agencies and programs funded through discretionary funds– such as NIH and NSF– would be forced to deal with a cut of $55 billion in FY2020.  An agreement must also be reached for FY2021 in order to prevent similar automatic cuts.

Advocacy groups have mobilized to draw Congressional attention to the serious problems surrounding maintaining current spending caps.  Congressional discussions have begun and the situation will take months to resolve.

 

CBO: Shutdown Cost $11B

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The nonpartisan Congressional Budget Office released a report today that the recent 35 day, 5 week government shutdown cost the U.S. economy $11 billion. Other take aways:

  • It permanently lost $3 billion in economic activity for the 4th quarter.
  • The shutdown delayed approximately $18 billion in federal discretionary spending for compensation and purchases of goods and services and suspended some federal services.
  • The level of real GDP in the first quarter of 2019 is expected to be reduced by 0.2 percent, or $8 billion less than it would have been if the government had been open.

Read the report here. 

Three Week Deal…Some Ancillary Fixes

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As part of the three week deal signed into law on Saturday, the measure (H.J.Res. 28) would reopen the nine Cabinet departments and several independent agencies closed during the shutdown through February 15. Beyond funding these agencies, there were other significant items included in this agreement.

Back Pay

Federal employees will receive back pay as part of the agreement. Most employees should be expect to receive their two missed paychecks by the end of the week. Government contractors may or may not receive missed pay depending on the nature of their contract. States or grantees that helped fill the gap during the shutdown can expect to be reimbursed.

Conference Committee

As part of the agreement, the House and Senate will convene a conference committee to work out a deal on FY 2019 Homeland Security spending, including the fate of the Administration’s demand for $5.7 billion for border wall construction, which is spending Congressional Democrats have long opposed.

Pay-Go

Under the Pay-As-You-Go Act of 2010 (PL 111-139), the White House Office of Management and Budget (OMB)  is supposed to issue a report within 14 days after the end of a Congressional session outlining whether enacted laws added to the deficit over five or 10 years. If so, then the OMB has to implement across-the-board cuts to any programs not exempt from the statute, to eliminate the excess.

Routinely, since the 2010 law was enacted, Congress has simply decreed that certain pricey provisions will not be added. For example, Congress removed the impact of the $1.5 trillion, 10-year tax cuts from the OMB’s calculations as part the 2017 stopgap appropriations bill both were signed into law the same day.

The stopgap spending bill includes provisions delaying roughly $800 million in spending cuts, mainly (about 90 percent) impacting Medicare. Because Congress did not act in time, the OMB should have had to implement the cuts, but the shutdown delayed implementation.

That Pay-Go “debit” will pop up again next year unless Congress eliminates it once again on any FY 2019 final package. A House-passed, $271.8 billion package (HR 648) of six appropriations measures would have wipe out the scorecard’s existing debit, so only future legislation increasing deficits would count for the OMB’s calculations.

 

HHS Budget FY2019

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The President’s Budget request for HHS proposes $95.4 billion in discretionary budget authority and $1,120 billion in mandatory funding while proposing to shift many mandatory programs to discretionary, including GME.  The budget would also consolidate all GME funding into one program while maintaining the site caps. Additionally, the budget proposes to cut or eliminate all public health training funding, including Title VII and Title VIII (Nursing Workforce Development received $83 million, a $145 million cut).

Certain research functions from across the HHS are proposed to be consolidated within NIH and established as three new NIH institutes: the National Institute for Research on Safety and Quality; the National Institute for Occupational Safety and Health, including the Energy Employees Occupational Illness Compensation Program; and the National Institute on Disability, Independent Living, and Rehabilitation Research.

Prior to the two-year budget deal passed by Congress, NIH was slated for a 27 percent cut, but would now receive $35.517 billion.

Overall, NIH fared well considering, highlights include:

  • funding via the 21st Century Cures Act;
  • funding for three existing agencies elsewhere that the administration is proposing to consolidate within NIH; and
  • funding from the HHS-wide initiative for opioids.

The budget does impose a salary cap as to the percentage of investigator salary that can be paid with grant funds and by reducing the limit for salaries paid with grant funds from $187,000 to $152,000 and includes a provision to “cap the percentage of investigator salary that can be paid with grant funds to 90 percent of total salary” for principal investigators funded by NIH. The budget does discuss that the Administration has been prohibited from instituting or investigating an F&A cap by Congress.

 

HHS Budget in Brief: summarizes NIH proposals on pages 44-50 of the PDF (40-46 of the document)/

HHS Tables

Budget Addendum: reflecting changes after the enactment of the Bipartisan Budget Act on Friday

More Information About FY2019 Budget Request

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Department of Defense

The Pentagon’s FY2019 budget request includes $445.9 million for the basic research (6.1) programs funded by the Army, a cut of about $41 million compared to the FY2017 level.  At the same time, the budget request asks for $919.6 million for Army applied research (6.2) programs, a decrease of about $300 million from FY2017.

Navy 6.1 programs would be cut by about $34 million and would receive approximately $597 million and Navy 6.2 programs would see a cut of roughly $89 million below the FY2017 level and would be funded at about $891 million under the FY2019 budget proposal.

At nearly $518 million, Air Force 6.1 would be cut by $27 million while Air Force 6.2 programs would see a total of roughly $1.31 billion, a $13-million cut.

Defense-wide basic research program would see a slight bump to $708 million while defense-wide 6.2 program would seen an increase of $207 million to $1.98 billion.

Additional details about the FY2019 Pentagon research budget request are available here.