Bad Things Come in Threes Legislative Briefing Session Montpelier, - PowerPoint PPT Presentation

Bad Things Come in Threes Legislative Briefing Session Montpelier, VT November 20, 2013 Federal Funds Information for States www.ffis.org

Three months, three (new) crises in the making  December 13: a grand bargain? – The entitlement/tax reform conundrum – The past as prelude  January 15: expiration of the current CR – Another shutdown? – Sequestration?  February 7: debt limit suspension expires – The unthinkable?

How did we get here? And where are we going? CBO's Long-Term Budget Projections 30.0 Spending 25.0 Revenues 20.0 Percent of GDP Social Security 15.0 Major Health Care Programsa 10.0 Other Noninterest Spending 5.0 Net Interest 0.0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 Source: CBO Long-Term Budget Outlook, 9/13

Grants in the FFIS database tell the story Source: FFIS Grants Database

A grand bargain? Divergent FY 2014 budget proposals Savings in President's, House, and Senate Budgets (FY 2014 - FY 2023, $ in billions) Relative to CBO Baseline/Current Law President House Senate Health -$152 -$2,722 -$137 Other Mandatory -22 -962 -76 Discretionary -174 -249 -382 Chained CPI -230 0 0 Revenue -746 0 -811 Sequester 1,018 0 995 War and Sandy Drawdowns -1,036 -931 -1,268 Jobs Measures 216 0 100 Subtotal -$1,126 -$4,864 -$1,579 Interest -180 -869 -195 Total -$1,306 -$5,733 -$1,774 Source: Committee for a Responsible Federal Budget

Relative to CBO Baseline/Current Law Health President House Senate Health -$152 -$2,722 -$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 rather than beneficiaries, and focused on Medicare

Other Mandatory Relative to CBO Baseline/Current Law President House Senate Other Mandatory -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

Revenues Relative to CBO Baseline/Current Law President House Senate Revenue -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 to allow lower rates) Senate : No specifics beyond limiting tax expenditures and targeting “the wealthiest Americans and big corporations”

The BCA is the law of the land Discretionary spending caps (saves $917 billion/10 yrs.) 1. Joint Select Committee on Deficit Reduction (failed) 2. Sequestration ($1.2 trillion in savings/9 yrs.) 3.  $984 billion in cuts through FY 2021 ($109 billion per year)  Split equally between defense/nondefense  Many mandatory and a few discretionary programs exempt (special rules for some programs)

Sequestration in FY 2013 vs. FY 2014 FY 2013 FY 2014 Mandatory ATB (-5.1%) ATB (-7.2% est.) Program Exemptions Yes Yes Effective Date March 1, 2013 October 1, 2013 Flexibility PPA PPA Discretionary ATB (-5.0%) Lower Caps Program Exemptions Yes No Effective Date March 1, 2013 October 1, 2013 Flexibility PPA Appropriation Account Enforcement N/A Same as FY 2013

No paths conform to BCA in FY 2014

Under BCA, increases after FY 2014

Is there a way forward? BCA is amended to provide additional defense spending • in FY 2014, possibly achieved by extending BCA caps beyond 2021 Will Democrats entertain the notion of revenue-neutral • tax reform? Will Republicans entertain the notion of raising revenues? If either is true, tax expenditures may be on the table, including • tax-exempt bond interest and the deduction for state-local taxes Some kind of “deal” should ease the way for a debt-limit • increase, assuming history did not.

Clear as mud? Questions? For more information: www.ffis.org, Marcia Howard (mhoward@ffis.org)