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Category: Budget

Senate Bill Requires Reports on Impact of Sequestration

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Yesterday, the Senate passed a five-year reauthorization of farm legislation (S 3240) that includes a bipartisan amendment requiring detailed reports on the effects of the pending budget sequestration on both defense and nondefense discretionary spending. The amendment would require three reports: one from the Office of Management and Budget (OMB) on the overall budget figures under sequestration; one from the Pentagon on the impact on defense spending; and one from the President explaining how he would implement a sequester and what the effects would be across the board, including impacts to nondefense spending.

Senators Patty Murray (D-WA) and John McCain (R-AZ) lead the effort to get this language included in the farm bill.  The Pentagon report would be due August 15, the OMB report would be due within 30 days of enactment of the farm bill, and the President would be required to issue his report within 60 days of enactment.

Odds and Ends for the Week

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Student Loan Interest Rates:  Majority Leader Harry Reid and Minority Leader Mitch McConnell are getting close to a deal to prevent student loan rates from doubling on July 1st, from 3.4 percent up to 6.8 percent.  A deal could be announced as soon as today, although early next week seems more likely. The talks have centered on how to pay the roughly $6 billion it will cost to keep the interest rate on federal Stafford loans at 3.4 percent. Unless Congress intervenes, rates would increase to 6.8 percent starting July 1st. The list of options Reid and McConnell are considering include one favored by Reid that would tweak pension payment contributions by employers and increase premiums paid by businesses for Pension Benefit Guaranty Corp. coverage. The House will evaluate the proposal once the Senate reaches a deal, but they will not yet confirm support for Reid’s proposed pay-for.

Highway and Transit Programs:  Transportation bill conferees are getting closer to a deal on legislation to reauthorize federal highway and transit programs. Congressional staff are expected to work through the weekend to try and hammer out a final agreement. When that is completed, some conferees will get back together on Tuesday when the House returns from a long weekend away. Lawmakers are racing against the clock as the current extension expires on June 30th, the same day that Congress is expected to recess for the Fourth of July week. It is expected that staff is also drafting a 6-month extension measure in case Congressional members cannot reach agreement on the larger reauthorization bill.

End-of-Year “Fiscal Cliff”:  The cuts through sequestration are just one of a number of high-profile fiscal issues that Congress will need to address after the November election. The Bush tax rates are set to expire at the end of the year, and it’s likely that Congress will have to raise the debt ceiling again. This is the same issue that faced Congress last August that put the Budget Control Act and sequestration in place. Both Democrats and Republicans have said publicly that they want to avert the across-the-board sequestration cuts, which would hit roughly $500 billion each to defense and non-defense discretionary spending over the next decade. But the two sides have been unable to reach a deal about how to find alternative deficit reduction to replace the cuts, as Republicans are opposed to raising taxes and Democrats are hesitant to cut entitlement spending.

This Week in Congress

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The House was in recess last week, while the Senate kept itself busy with continued consideration of the “Farm Bill”. This bill authorizes agricultural research programs, as well as a host of other programs that support the US agriculture industry. The Senate Appropriations Committee also considered a few more spending bills, including the FYFiscal Year 2013 Financial Services spending bill and the FYFiscal Year 2013 Labor-HHS-Education bill, which funds the National Institutes of Health. Both the House and Senate will be in session this week, beginning the busy rush that will lead up to the 4th of July recess week.

Appropriations & the Sequester:  Having passed nearly half their annual spending bills, House appropriators return this week expecting to take on three additional FY 2013 measures:  Interior-Environment, Transportation-HUD, and Agriculture. However, slow-moving negotiations on a long-term surface transportation reauthorization (highway and transit programs) could force leaders to hold off on moving the spending bill for the departments of Transportation and Housing and Urban Development (HUD), which would provide $51.6 billion in discretionary funding.

Appropriators from both chambers are seeking answers from the Obama Administration on how it plans to carry out automatic spending cuts (sequester) early next year, as directed by the Budget Control Act approved last August.  Senate appropriators unanimously backed a recent provision that would require the administration to report to Congress with details about how the sequester would be applied. That provision in the Senate Financial Services Appropriation bill is nearly identical to language found in the House Financial Services draft bill. It would require the Office of Management and Budget (OMB), which is funded under the measure, to send Congress a list of each account that would be subject to the automatic cuts, organized by appropriations subcommittee, within 60 days of enactment. It also would require the President to report within 30 days on how the sequester would be applied for FY 2013 based either on appropriations bills or the current rate of a continuing resolution (CR), if one is in effect.

Surface Transportation Negotiations:  House and Senate negotiators say they are still talking about a new surface transportation bill but the two chambers now face a serious schedule crunch. The House officially gets back to work this afternoon following a weeklong recess, which leaves just two weeks of work before the next scheduled recess period. With the two sides still so far apart on big issues, more observers now think Congress will have to extend current road and transit programs so they don’t expire at the end of this month.

The next two weeks is critical for lawmakers as they try to finish the highway bill, and at the same time they are negotiating final legislation on student loan interest rates, flood insurance, Food and Drug Administration user fees, and farm policy. And to add fuel to the fire, their attention could be diverted at any moment from a pending Supreme Court ruling on the Affordable Care Act.

Senate L-HHS-ED Appropriations

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Earlier today, the Senate Labor, Health and Human Services (HHS), Education Appropriations Subcommittee approved their FY 2013 appropriations measure by a vote of 10-7.  That bill would provide $158.8 billion in discretionary spending for the departments of Labor, Health and Human Services, and Education, as well as related agencies.  This is about $2 billion more than the FY 2012 level and roughly equal to the President’s budget request.  The bill includes a discretionary program level of $12.342 billion for the Department of Labor (FY 2012 level $12.553 billion), $71.0 billion for the Department of HHS (FY 2012 level $69.62 billion), $68.52 billion for the Department of Education (FY 2012 level $68.112 billion) and $14.15 billion for related agencies (FY 2012 level $13.832 billion).

The full Senate Appropriations Committee plans to markup the bill on Thursday.  At this time, we hope to also see the report accompanying the bill, which will provide more detailed information on how funds are to be spent within each of the programs.  Stay tuned for more information.

You can read a summary of the bill on the Senate Appropriations Committee web page.

This Week in Congress

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Senate appropriators are scheduled to release their Labor-HHS-Education spending bill at a subcommittee markup Tuesday. This tends to be the most controversial appropriations measure each year and will likely receive a fair amount of Republican opposition given provisions that would fund key elements of the 2010 health care and financial regulatory overhauls. Action on the spending measure comes as lawmakers anticipate a Supreme Court ruling on the health care overhaul later this month. The House has not yet released its Labor-HHS-Education bill but has indicated they will do so by the end of June.

Meanwhile, there are two authorizing measures moving their way through the messy legislative process: Highways and Transit, and the Farm Bill. Congress has until the end of June to reauthorize the highway and transit bill or settle for another extension of current spending authority. If conferees don’t have the major elements of a deal put together when the House gets back from their recess next week, the odds are against getting a new surface transportation bill before the November election. The Office of Federal Relations continues to urge our delegation and the conferees to retain language in the bill to reauthorize the University Transportation Centers (UTCs) in their current configuration. UW operates the Region X UTC, which was re-launched last month as the PacTrans Center.

The Senate is expected to spend most of this week considering the five-year farm bill. In a policy statement released June 7, the Obama administration expressed disappointment that the $969 billion measure wouldn’t achieve the savings it seeks in crop insurance and the commodity program. The leaders of the Senate Agriculture Committee have argued that reducing premium subsidies for crop insurance, something the president proposed in his 2013 budget request, might cause farmers to leave the program or reduce their level of coverage, which ultimately could cost the federal government in the event of a disaster. But critics of the program argue that the federal government is subsidizing private insurance companies and well-financed farm operations. Several research programs are also authorized in this bill, which could impact UW research efforts on biofuels, forestry, and resource management.