FY11 End Game

Posted on April 11, 2011October 17, 2012

Federal government is now operating under another one-week continuing resolution (CR) intended to give lawmakers time to debate and approve the larger agreement they reached late Friday night. The so-called “bridge” CR was cleared by Congress shortly after midnight Friday, immediately after a deal was reached on funding for the remainder of FY11, thereby preventing a government shutdown. Consistent with recent practices regarding short-term CR extensions, it also cut $2 billion from current-year spending, mostly from transportation and housing programs.

The FY11 spending agreement should be released Monday, with House floor action Wednesday and Senate action to follow. Under the budget deal, FY11 spending would be cut by about $38 billion and none of the most controversial policy riders would be included. The cuts would come from both the discretionary and mandatory side, with almost $18 billion in reductions in mandatory spending and $20 billion in discretionary spending cuts — $12 billion of which has already been enacted through discretionary cuts in the last three short-term CRs. More than $1 billion of the discretionary cuts will come from an across-the-board reduction affecting all programs except Defense.

The battle over fiscal 2011 spending has been viewed as a small-scale preview of larger fights to come, including those on the fiscal 2012 budget and spending, and one even sooner on the national deficit. Republicans have repeatedly said they intend to use the need to raise the nation’s debt limit as a “leverage point” to demand more spending cuts or substantial controls on future spending. The efforts on current-year spending may have provided a useful getting-to-know-you exercise for the three primary negotiators in those upcoming battles: President Obama, Speaker Boehner, and Senate Majority Leader Harry Reid, D-Nev.

FY12 Battle Begins

After an agreement was reached late Friday on funding for the current year, policymakers are now looking ahead at the larger and more explosive budget issues that must be addressed, including FY12 spending and raising the debt limit.

Beginning on Thursday, the House plans a two-day debate of their FY12 budget blueprint and the contentious issue of long-term debt reduction. The budget would cut spending, compared with Obama’s FY12 proposed budget, by $6.2 trillion over 10 years, and shrink cumulative deficits by $4.4 trillion. It also would cut the current top tax rate from 35 percent to 25 percent for families and companies, and transform traditional Medicare and Medicaid benefits respectively into premium support payments and state block grants.

In the Senate, senior Democrats say the budget debate in that chamber will be delayed at least until after they return May 2 from their two-week recess.

Shutdown Averted

Posted on April 9, 2011October 17, 2012

President Obama and Congressional leaders announced a budget deal late Friday to avert a government shutdown. The outline of the deal is as follows: up to $39 billion in cuts from the 2010 budget, $514 billion in spending for the defense budget covering the remainder of this fiscal year, a GOP agreement to abandon controversial policy riders dealing with Planned Parenthood and the EPA, and an agreement to pass a seventh continuing resolution late Friday night to keep the government operating through next Thursday while the deal is written in bill form. The temporary measure also cuts nearly $2 billion in spending from transportation and housing programs.

Federal Shutdown Looms

Posted on April 8, 2011October 17, 2012

A Thursday-night meeting between congressional leaders and President Obama failed to resolve an impasse over federal spending that, barring an agreement on Friday, would result in a federal government shutdown. Federal government is currently operating on a continuing resolution (CR) that is set to expire at midnight tonight (Friday, April 8^th). If House Republicans and Senate Democrats are unable to reach an agreement on FY11 and no extension of stopgap funding is enacted today, most government operations will have to shut down. The question of whether to include some controversial policy provisions for abortion funding and environmental regulations appears to be the last major hang-up.

The House yesterday passed a one-week CR extension, which would also fully fund the Department of Defense for the remainder of the fiscal year. Republicans argue that their bill, which would keep federal government operating for one week and cut an additional $12 billion in domestic spending, was needed to prevent a shutdown and ensure that US troops would be adequately funded. House Democrats sought to substitute a simple one-week extension – with no policy riders – but were unable to get a vote on their proposal. Senate Democrats have said the bill is a “non-starter” in that chamber and the President said he would veto the measure if it ever reached his desk.

Also yesterday, OMB Director Lew issued guidance to agencies regarding their preparations for a possible shutdown. Lew’s memo details the actions agency heads must take if a shutdown is ordered, including the distribution of furlough notices to “non-excepted” employees (i.e., those who are not considered “essential”). The memo also details certain agency and employee activities that are and are not allowed during the time an agency is not funded. Among the activities that continue will be military actions, customs and border protection activities, core federal law enforcement, air traffic control operations, postal services, and meat and poultry inspection.

Shutdown, FY12, and a Balanced Budget Amendment…

Posted on April 5, 2011October 17, 2012

Shutdown Countdown…

Late last night, House Republicans announced that they’re prepared to pass a new one-week continuing resolution (CR) extension with an additional $12 billion in cuts to FY11 unless Democrats “get serious about making real spending cuts on a long-term bill” for the remainder of the year. The two parties have been negotiating over proposed cuts for the year, with Republicans favoring the $61.5 billion in cuts included in HR 1 as passed by the House and Democrats grudgingly agreeing on a $33 billion level of cuts.

The surprise move by Republicans to approve yet another CR is the latest threat to either force action on the FY11 budget or prepare for a government shutdown at the end of this week. Current stopgap funding expires Friday night, and with only a few days remaining it would be very difficult for legislation incorporating any final agreement to be drafted and enacted by that time. The Washington Post reported yesterday that OMB has instructed federal agencies to begin preparing for a possible shutdown. House leaders are also preparing for a government shutdown as they plan to distribute a pamphlet about the mechanics of a partial congressional work-stoppage to all lawmakers’ offices later this morning.

A draft bill being prepared by the House Appropriations Committee last night would fund the Defense Department through the end of FY11 but require $12 billion in new cuts as the price for keeping domestic agencies and the State Department operating another week. The $12 billion is intended as a further down payment toward a final deal, just as $10 billion in cuts were promised under two prior CRs. But Boehner has also raised the ante by demanding total cuts of more than the $33 billion target that was the focus of talks over the weekend.

Senate Democrats will likely oppose the proposed one-week CR extension but if they blocked the measure they could be held responsible for shutting down the government. House Appropriations released a summary of the new one-week stopgap measure, which is designed to appeal to GOP conservatives by providing deeper cuts than prior CR extensions (cutting $12 billion in discretionary spending for the one week, versus $2 billion a week under the last two extensions).

The House Speaker, Senate Majority Leader, and the two House and Senate Appropriations chairmen will meet today at the White House with President Obama and Vice President Biden to try to move negotiations forward – even in light of the House Republican’s new offensive on the FY11 process.

FY12

As if the FY11 process isn’t exciting enough, the House Budget Committee Chair will roll out an FY12 blueprint today that could slash up to $6 trillion in the next 10 years from federal spending, reforms and cuts entitlements, and overhauls sections of the tax code. The Republican budget is expected to include several major proposals: reduction of the corporate tax rate to 25 percent; elimination of corporate tax loopholes; spending cuts with enforceable caps; reforms to “save critical health and retirement programs”; health reform that “repeals and defunds last year’s health reform law,; and a promise to restore “America’s exceptional promise,” according to a draft summary of the budget.

Sources said Ryan plans to lower spending below FY08 levels, a significant cutback but not as dramatic as the previous discussion to cut down to FY06 levels. Other plans include block grants for Medicaid, shifting control to the states. Those on Medicare would get to choose among competing private insurance plans. Additionally, the budget proposal is expected to eliminate funding for the health care law, likely by stopping the expansion of Medicaid and subsidies for private health insurance.

The bill will likely get marked up in committee Wednesday, and the Rules Committee plans to outline the parameters for debate on Tuesday or Wednesday of next week. At that point, the House is expected to pass the resolution and send it to the Senate.

Balanced Budget Amendment

In related news, House Republicans are looking to attract support from enough lawmakers in both parties to move a balanced-budget amendment to the US Constitution in conjunction with coming debates over the budget and the debt limit. The House GOP proposal would require the President to submit a balanced budget, require Congress to enact balanced budgets each year but allow an annual deficit to occur if Congress specifically approves by a three-fifths majority vote of each chamber, and require three-fifths majority votes in order to raise the nation’s statutory debt limit. The measure would allow a waiver of restrictions if the nation is at war or involved in a major military conflict. A constitutional amendment requires two-thirds votes of both chambers, and then must be ratified by at least 38 states.

All 47 Senate Republicans last week joined together to back their own proposed balanced-budget constitutional amendment that also would cap federal spending at 18 percent of gross domestic product. Government spending now stands at about 24 percent of GDP, and has historically run at about 20 percent of GDP. Similar to the House proposal, it would direct the president to submit, and Congress to enact, a balanced budget annually; allow a deficit to occur only by supermajority votes of the House and Senate (a two-thirds vote, versus a three-fifths vote in the House measure); waive the restriction in times of declared war (although a three-fifths vote would be needed to run a deficit when there is a military conflict without a declaration of war); and require three-fifths votes of both chambers to raise the debt limit. The Senate Republican proposal would also require two-thirds votes of both chambers to raise taxes.

FY11 Showdown and FY12 Startup

Posted on April 4, 2011October 17, 2012

The FY11 budget predicament reaches its climax this week as tea party conservatives and Democratic leaders clash over how much, or how little, to slash from this year’s budget, and whether to include conservative policy riders that limit the federal government’s ability to spend money on things like Planned Parenthood, environmental regulations, and other liberal priorities. If the two sides don’t come to agreement, the government will shut down on Saturday.

Everyone agrees that the outcome of the FY11 budget that comes to a head this week will affect the budget battles ahead, so both sides are strategizing what to fight for in the current budget and how much to hold off the bigger battles for the FY12 budget debate.

Negotiations began last week on a possible FY11 package that would cut $33 billion for the year ($73 billion from President Obama’s request for fiscal 2011), although House leadership has repeatedly said no agreement had been made on a specific level of cuts. Supported by tea party activists, GOP freshmen, and other conservatives have argued for the full $61.5 billion in cuts that was included in HR 1 as passed by the House in February, $10 billion of which has already been enacted as part of GOP short-term stopgap funding extensions.

When the overall budget number and cuts are agreed to, it’ll be a race against the clock to keep the government running. Earlier this year, Republicans instituted a three-day vetting period for most pieces of legislation and they are unlikely to waive that requirement for the FY11 bill. This essentially makes Wednesday the final day a compromise could hit the floor and gain approval before the end of the current continuing resolution (CR) on Friday at midnight. They can also choose to pass a short-term CR to fund the government for a few days but increasing numbers of both Democrats and Republicans believe it is time to either reach a final agreement or have the showdown over spending that many have expected could eventually occur. Two continuing resolution (CR) extensions have been enacted in the past month, with the latest extension of government spending authority expiring Friday night.

And, sadly, this is not the last budget battle Democrats and Republicans will fight this year. The FY12 budget battle will begin Tuesday when House Budget Chairman Paul Ryan (R-WI) unveils his proposal that promises to cut more than $4 trillion from federal spending over the next decade. The annual budget resolution is a non-binding blueprint that simply outlines Congress’ goals for spending, taxes and deficits in future years. It is usually more important as a one-year document that sets a limit on discretionary appropriations for the coming fiscal year, and for providing procedural protections against Senate filibuster for bills moving through a special “reconciliation” process. House floor consideration of the GOP budget is expected next week.

This action will almost certainly set off a broader public debate concerning the need to reduce future debts and deficit. Lawmakers and others who have been told about the budget resolution say it will aim to scale back some domestic programs to FY06 spending levels, include some cuts to Defense spending and call for cost savings in mandatory spending programs including Medicaid and Medicare. The budget resolution is expected to reflect plans to replace the current formula-based Medicaid program, which provides health care to the poor, with a block grant system in which the states receive a set amount of funding from Washington and have greater latitude to design their own programs and determine who is eligible for Medicaid.

The budget resolution will kick off the next round of rhetorical battles over the more than $1 trillion deficit and growing $14 trillion national debt.

The Office of Federal Relations is continuing to monitor developments on both FY11 and FY12 budgets and will report new information as it becomes available.