SEQUESTRATION 2.0 Through the County Lens WWW.NACO.ORG | MARCH 2013 - PowerPoint PPT Presentation

SEQUESTRATION 2.0 Through the County Lens WWW.NACO.ORG | MARCH 2013

Overview Understanding Sequestration Context for Federal Debt and Deficit Discussion Sequestration: Congressional Action Impact of Sequestration

Federal Fiscal Cliff Fiscal Cliff Debate: Key Issues and Timelines Sequestration in Effect: Across-the-Board Cuts (Begin March 1, 2013) FY2013 Federal Appropriations: Process Completed for FY2013 Federal Debt Ceiling Deal: Debate Delayed to June/July 2013 President's FY2014 Budget: Release Delayed Until April 10, 2013 FY2014 Appropriations Process: Congress has Just Started Tax and Entitlement Reform: Congressional Hearings have Started

Key Dates Congressional Budget Process: Key Dates Source: National Journal

Sequestration Why Counties Should Care About Sequestration and Ongoing Debt and Deficit Negotiations  COUNTIES ALREADY IMPACTED: Nearly 70 percent of the 2010 Bowles-Simpson Commission’s recommended cuts to discretionary spending have already been enacted into law  MORE CUTS AHEAD: With a first fiscal-cliff deal complete and sequestration enacted, Congress will re-focus its attention on resolving the debt limit issue and tax and entitlement reform

Sequestration What is Sequestration? Sequestration: Process of applying automatic, across-the-board spending reductions evenly divided between security (defense) and non-security (mandatory/entitlement funds + annual discretionary funds) functions • Sequestration was first enacted in 1985 as part of the balanced budget and emergency deficit control act (commonly known as the Gramm-Rudman-Hollings Act) • Serves as the model for the process to be used during implementation of the Federal Budget Control Act of 2011

Sequestration Potential Impact of Sequestration “However, the report leaves no question that sequestration would be deeply destructive to national security, domestic investments, and core government functions.” - OMB Report Pursuant to the Sequestration Transparency Act of 2012 (P. L. 112 – 155), President’s Office of Management and Budget, September 14, 2012

Federal Budget Picture Context for Federal Debt and Deficit Discussion and Actions

Federal Budget Picture Federal Budget Picture Fiscal Year 2012 Outlays: $3.63 Trillion Nearly One-Third of Our Spending is Borrowed Source: Congressional Budget Office (January 2012)

Federal Budget Picture FY2012 Federal Budget Snapshot Source: Congressional Budget Office (January 2012)

Federal Budget Picture Source: Office of Management and Budget

Federal Budget Picture Projected U.S. Debt A Historical Comparison Source: Fix the Debt

Federal Budget Picture Health Care Costs are the Primary Driver of the Debt

Federal Budget Picture U.S. Debt Drivers Growing Entitlement Spending Federal Spending and Revenues (Percent of GDP) Source: Fix the Debt

Sequestration Sequestration: Congressional Action

Sequestration How Did We Get Here? • Reached Old Federal Debt Ceiling in 2011 • Budget Control Act of 2011 (S. 365) Signed into Law • Super Committee Fails to Reach Agreement Sequester Scheduled To Begin January 2, 2013 • American Taxpayer Relief Act (H.R. 8) Delayed Sequester Until March 1, 2013 • Sequester Begins March 1, 2013 Sequestration Effect for 2013 Impacted by Continuing Resolution (P.L. 113-6)

Sequestration American Taxpayer Relief Act (ATRA) Delays Sequester Source: National Journal

Sequestration How Did We Get Here? Budget Control Act of 2011 (S. 365) Signed into law August 2, 2011 Set stage for $2.4 Trillion increase in Federal debt ceiling BUT with offsetting reductions in two phases $900 Billion in savings over next 10 years, including new spending caps for 12 annual appropriations bills Established Joint Select Committee on Deficit Reduction (―Super Committee‖) to identify at least $1.5 Trillion in extra savings over 10 years Joint Committee failed to reach agreement on savings, triggering the sequester — the across-the-board cuts in both defense and non-defense accounts each year through FY2021

Sequestration How Did We Get Here? American Taxpayer Relief Act of 2012 (ATRA/ H.R. 8) Signed into law January 2, 2013 Delayed sequestration by two months to March 1, 2013 Under the original Budget Control Act of 2011 (BCA), the sequester would have occurred on January 1, 2013 Lowers discretionary spending caps for FY2013 by another $4 billion and by $8 billion in 2014 to offset cost of delay Cuts overall FY2013 spending by $85 billion and pro-rates FY2013 spending until the end of the fiscal year (September 30)

Sequestration Impact of Sequestration

Sequestration Breaking Down the FY2013 Sequester According to the American Taxpayer Relief Act of 2012 Source: Bipartisan Policy Center

Sequestration Breaking Down the FY2013 Sequester Source: Center on Budget and Policy Priorities (March 22)

Sequestration FY2013 Projected Cuts: 5.0% Domestic Discretionary Reduction = $25.8 Billion Total • FEMA Disaster Relief = $430 Million • HUD HOME Investment Program = $50 Million • DOJ State Criminal Alien Assistance Program (SCAAP) = • HUD Section 8 Housing = $938 Million $10 Million • HUD Homeless Assistance = $96 Million • Education Dept’s Elementary & Secondary Education = • U.S. Economic Development Administration (EDA) = $789 Million $13 Million • FTA Transit Capital Grants = $96 Million • USDA Rural Development = $127 Million • HHS Substance Abuse & Mental Health = $168 Million • Clean Water State Revolving Fund (CWSRF) = • HHS Child Care Discretionary = $115 Million $72.55 Million • HHS Older American / Aging Services = $75 Million • Drinking Water State Revolving Fund (DWSRF) = $46.1 Million • DOJ State & Local Law Enforcement = $56 Million • EPA Brownfields = $4.71 Million • DOJ Juvenile Justice = $13 Million • State and Local Air Quality Management = $11.76 Million • DOL WIA Title I Formula Grants to States = $162 Million • FEMA State & Local Disaster Preparedness & Recovery • HUD Community Development Block Grant (CDBG) = Programs = $67 Million $165 Million

Sequestration FY2013 Projected Cuts: 5.1% Domestic Mandatory Reduction = $5.495 Billion Total • Payment-in-Lieu-of-Taxes (PILT) = $20 Million • HHS Social Service Block Grant (SSBG) = $85 Million* • HHS Temporary Assistance for Needy Families = $1 Million • USDA recently announced that funding for the Secure Rural Schools (SRS) program is now subject to sequestration and is requiring that States pay back 5.1% ($17.9 million) of the FY2012 funding that had been previously dispersed to counties and rural schools * Calculation factors in supplemental appropriation for Hurricane Sandy relief package

Sequestration What is Exempt from Sequestration? Here is a snapshot of 149 exempt programs: • • Medicaid Childcare Entitlement • • Veteran’s Affairs Programs Social Security • Medicare Part D – Low-income Subsidies • Commodity Loans and Conservation Reserve Program • Medicare Payments to States for • Qualified Individual Premiums Crop Insurance • • Food Stamps (SNAP)* Military Personnel Funding • Children’s Health Insurance Funds • Pell grants • • Transit Formula Grants Salary and benefits for Members of Congress and the President • Grants in Aid to Airports

Sequestration Impact of Continuing Resolution on Sequester FY2013 Continuing Resolution (P.L. 113-6) Signed into law March 26, 2013 Ordinarily, a CR pro- rates funding for federal agencies and programs at the prior year’s level for a short period, but this CR locks in the $85 billion in sequestration or the automatic, across-the-board cuts of 5 percent for domestic discretionary programs It also contains some spending adjustments that give certain federal agencies (i.e. DOD, USDA, VA, Commerce, Homeland Security and Justice) flexibility to implement the across the board sequester cuts Additionally, it provides new and adjusted FY2013 funding levels through the end of the fiscal year (Sept. 30, 2013) for the departments of Defense, Agriculture, Justice, Commerce, Homeland Security and Veterans Affairs The CR did contain some funding increases for various federal programs that offset reductions that resulted from sequestration

Sequestration Sequestration and Furloughs Furloughs Will Decrease Service Delivery The CR provides some flexibility to implement sequestration but the overall magnitude of the cuts will ensure that the announced staff furlough plans of many federal agencies could still go into effect County governments can expect decreased service delivery from their federal partners Furlough plans vary widely, with some agencies saying they won’t need to require employees to take unpaid days off, while others have projected furloughs ranging from several days to 22 days this fiscal year Where furloughs are planned, timing also differs. Several agencies, including the largest, the Defense Department, expect to start the week of April 21, while some do not expect to begin until later in the year The impact of these furloughs comes on top of stagnant salaries, numerous general hiring freezes by federal agencies and cuts to overall staffing levels