Category: Budget

Yesterday, the House easily passed a continuing resolution (CR) that the Senate will likely vote on next week. The House voted, 329-91, to back the CR (H J Res 117) that would fund government through March 27, 2013 at the discretionary limit set by last year’s deal to raise the federal debt ceiling (Budget Control Act), PL 112-25).

While described as a “clean” six-month extension of current funding, the House-backed measure does add billions of dollars in new spending, grants program extensions, and sets funding restrictions. Overall, the measure provides spending for the first six months of fiscal 2013 at an annualized rate of $1.047 trillion for discretionary spending, which matches the caps set in the 2011 Budget Control Act. The plan exceeds fiscal 2012 spending by $8 billion. Most of the discretionary increase ($5.937 billion) would be appropriated in a .621 percent across-the-board increase covering all 12 annual spending bills, with the remainder, $1.992 billion, marked for specific programs. The remaining funding would go toward, among other projects, nuclear weapons modernization at the Energy Department, cybersecurity efforts at Homeland Security, wildfire suppression efforts at Interior and the Forest Service, and disability claims processing at Veterans Affairs.

Source: Congressional Quarterly

There is growing pessimism on Capitol Hill that Congress will be able to reach a deal to avert the automatic spending cuts, known as sequesters, before – or even after – the November election. The “Gang of 8”, a bipartisan group of senators, continues to work on a comprehensive deficit reduction plan that most likely would not be unveiled until after the election, if at all. But even members of that group, who are typically optimistic about the prospects for reaching a deal, see little reason to hope for a breakthrough in advance of a lame-duck session.

The most likely scenario for dealing with the sequester is an idea to use roughly $55 billion as a “down payment” on the debt that would temporarily turn off automatic spending cuts and buy Congress at least six months to work out a bigger deal next year. The down payment would be linked to a deficit-reduction framework that would bind committees with jurisdiction over spending and taxes to an action plan. The $55-billion down payment under discussion would be equal to about half of the scheduled cuts triggered by sequestration next year to defense and non-defense spending. But the bipartisan group faces several hurdles to reaching a deal, such as whether any tax increases would be included in the $55-billion package. This fight has doomed previous efforts to reach a grand bargain deficit-reduction plan. Democratic negotiators say the down payment must include measures to raise new revenues, but Republicans have yet to agree. If a deal is reached and leaders sign off on it, Congress could approve the plan during the lame-duck session.

In the meantime, the House will vote Thursday on a largely symbolic GOP bill (HR 6365) that would require President Obama to offer an alternative to the across-the-board discretionary spending and mandatory defense spending cuts currently scheduled for January 2013. The proposed legislation would require the President to report by October 15th on how he would replace the sequester with other spending reductions, not tax increases, and would need to achieve $109 billion in replacement savings over five years. The legislation is expected to pass in the House on a party-line vote but has no prospects for approval in the Senate. House Democrats, meanwhile, plan to offer a Democratic substitute bill that would replace the sequester with cuts to agricultural subsidies by closing tax breaks for the oil and gas industry and higher taxes on millionaires, but it’s not likely to get a vote on the House floor.

Congress is back in session this week after the long August break and political party conventions. There are few legislative priorities on the agenda before Congress breaks again at the end of the month through the November elections.

This week, the House will release and then vote on a six-month continuing resolution (CR) for FY2013, one of the few items that lawmakers must complete before returning to the campaign trail. The CR would keep the federal government running from October through March. A vote could take place as early as this Thursday. House passage would send the measure to the Senate, where it would likely pass next week as lawmakers are on recess the last week of September and current funding runs out September 30th.

Federal agencies will face lean times operating under a six-month CR, as the measure will reflect the $1.047 trillion FY2013 cap set for discretionary spending by the 2011 debt deal, the Budget Control Act (PL 112-25). A recent Congressional Budget Office analysis found the CR spending would amount to an $8 billion increase, or less than one percent, over FY2012 spending. But it likely won’t translate into more dollars for agencies. As happens routinely with emergency spending laws, the Office of Management and Budget will issue instructions to agencies on how to ration, or apportion, the funds for the first half of FY2013. “Because of the nature of CRs, you should operate at a minimal level until after your regular appropriation is enacted,” OMB has said in its past guidance. Agency officials likely will be even more cautious than usual, due to the uncertainties regarding the sequester that is scheduled to take effect on January 2, 2013.

Also this week the White House is expected to release a detailed report on the effect of the sequester, the automatic, across-the-board spending cuts set to occur in January. Under the transparency law, the report must provide an estimate of the percentages and dollar amounts that would be cut from every discretionary and mandatory spending account at the program, project, and activity levels, as well as a list of accounts that are exempt from cuts. Social Security, Medicaid, and funding for military personnel are among the programs that are exempt. Congressional members hope to use the report’s details on the cuts to make the case during the lame duck session for averting those cuts. The Office of Federal Relations will post detailed information on the report and also plan to disseminate a Federal Update email to the campus community by early next week.