Fasten Your Seatbelts, We’re in for a Bumpy Ride

NASBO Spring Meeting April 26, 2013 Santa Ana Pueblo, NM

Federal Funds Information for States

Where Are We Now?

$5,000 $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $-

Federal Receipts and Outlays, 2000-2017

Source: OMB for 2000-2012; CBO for 2013-2017 Receipts Outlays

Let’s Start at the Very Beginning

Discretionary Spending Limits Under Budget Control Act of 2011* ($ in billions)

Security** Nonsecurity

Total FY 2010 FY 2011

683 689 402 361

$1,084 $1,050 FY 2012

684 359

FY 2013 BCA

686 361

ATRA

684 359

$1,043 $1,047 $1,043 FY 2014 BCA ATRA*** FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

556 552 566 577 590 603 616 630 644 510 506 520 530 541 553 566 578 590

$1,066 $1,058 $1,086 $1,107 $1,131 $1,156 $1,182 $1,208 $1,234

*Figures exclude funding for overseas contingency operations **Security spending consists of spending from within the departments of Defense, Homeland Security, VA, National Nuclear Security Administration, intelligence ***BCA and ATRA reconfigure budget categories as defense and nondefense in FY 2014.

Sources: FY 2012 budget for FY 2010 and FY 2012 President; House Budget Committee website for House FY 2012; NGA for FY 2011

Focus on FY 2014

Category Defense Nondefense Implications of Various Scenarios on FY 2014 Discretionary Appropriations ($ in billions) FY 2013 FY 2014 BCA

546 501

$1,047 ATRA

544 499

$1,043 Post Sequester

501 473

$975 w/o Sequester

552 506

$1,058 Change

51 33

$84 w/ Sequester

497 469

$966 Change

-4 -4

-$8 House

552 414

$966 Change

51 -59

-$8

Divergent FY 2014 Budget Proposals

Health Other Mandatory Discretionary Chained CPI Revenue Sequester War and Sandy Drawdowns Jobs Measures

Subtotal

Interest

Total Savings in President's, House, and Senate Budgets (FY 2014 - FY 2023, $ in billions) Relative to CBO Baseline/Current Law President

-$152

House

-$2,722

Senate

-$137 -22 -174 -230 -746 1,018 -1,036 216 -962 -249 0 0 0 -931 0 -76 -382 0 -811 995 -1,268 100

-$1,126

-180

-$1,306 -$4,864

-869

-$5,733 -$1,579

-195

-$1,774

Source: Committee for a Responsible Federal Budget

Health

Health

Relative to CBO Baseline/Current Law President

-$152

House

-$2,722

Senate

-$137 President: Medicare Part D rebates; Medicare

provider

cuts;

means testing Medicare premiums

; Medicare cost sharing; federal employee health programs House: Repeal coverage provisions of ACA; convert Medicaid and CHIP to block grants;

Medicare Part D tort and means-testing

; Medicare premium support proposal would kick in later Senate: Nonspecific cuts focused on

providers

and focused on

Medicare

rather than beneficiaries,

Other Mandatory

Other Mandatory

Relative to CBO Baseline/Current Law President House Senate

-22 -962 -76 President: Reduce tax fraud;

reduce farm subsidies

; increase federal employee

retirement contributions

; reduce fraud and abuse; reform

PBGC

House: Increase

retirement contributions

;

reduce farm subsidies

; block grant SNAP; reform

PBGC

; wind down Fannie Mae and Freddie Mac; reform energy subsidies and reduce land purchases Senate:

Reform agriculture programs

and

PBGC

Discretionary

Discretionary

Relative to CBO Baseline/Current Law President House Senate

-174 -249 -382 President: Reduce discretionary beyond BCA levels beginning in FY 2017 House: Reduce transportation and other discretionary spending Senate: No specific recommendations

Chained CPI

Chained CPI

Relative to CBO Baseline/Current Law President House Senate

-230 0 0 President: Adopt chained CPI for most parts of federal budget and tax code, excluding means-tested programs. Savings are split -$130b on spending side, -$100b on revenue side House: No provision but possibly amenable to president’s proposal Senate: No provision

Revenues

Revenue

Relative to CBO Baseline/Current Law President House Senate

-746 0 -811 President: Limit value of certain exclusions and deductions (including tax-exempt bonds) to 28% tax bracket; “Buffett Rule”; cigarette tax House: Deficit-neutral tax reform (

limiting tax expenditures

lower rates) to allow Senate: No specifics beyond

limiting tax expenditures

“the wealthiest Americans and big corporations” and targeting

Sequester

Sequester

Relative to CBO Baseline/Current Law President House Senate

1,018 0 995 President: Repeal sequester but implement cuts to discretionary spending beyond those mandated by BCA caps, beginning in FY 2017 House: Retain sequester but reallocate cuts from defense to nondefense Senate: Repeal sequester but implement cuts to discretionary spending beyond those mandated by BCA, beginning in FY 2015

War and Sandy

War and Sandy Drawdowns

Relative to CBO Baseline/Current Law President House Senate

-1,036 -931 -1,268 President:

Assume a reduction

from FY 2013 levels, while CBO baseline assumes continuation at inflation-adjusted levels House:

Same as president

, with more modest drawdown assumptions Senate:

Same as president

, with more ambitious drawdown assumptions

Jobs

Jobs Measures

Relative to CBO Baseline/Current Law President House Senate

216 0 100 President: “Fix it First”; competitive transportation program;

infrastructure

bank; America Fast Forward Bonds; expand TIFIA; high speed rail; payroll tax credit for employers; Department of Energy Race to the Top House: No provisions Senate:

Infrastructure

repair; fix dams; dredge ports; infrastructure bank and technology in schools

Themes in President’s Budget

• • • Implement new competitive grants • • • • Preschool development “First in the World” High school redesign “Race to the Top” energy grants Add competitive elements to existing formula grants • • LIHEAP energy burden reduction Child Care Development Block Grant Consolidate separate funding streams • • ESEA reauthorization National Preparedness Grant Program

Open Questions of Import

Will the House and Senate adopt a concurrent budget resolution?

Will each chamber proceed based on its individual budget resolution?

How will the gap be bridged?

Will we end up back in Sequesterland?

The “action-forcing” event: debt ceiling Will be reached soon, with enough wiggle room to get through July.