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Appropriations and Budget Update

FY 2013 Appropriations
On September 13th, the House passed a six month continuing resolution (CR) by a vote of 329-91 which will fund the government through March 27, 2013.  The CR allows the government to stay within the $1.047 trillion in discretionary spending in FY 2013, the same level agreed to in last year’s Budget Control Act, and increase funding levels for most programs and agencies by about 0.6%. On September 22nd, the Senate passed the CR 62-30. 

In March, 2013 the Congress will need to provide an extension of spending authority for the remaining 6 months of Fiscal Year 2013 by either extending the CR for the balance of the year, by passing an Omnibus Appropriations bill or by a combination of a CR and a small minibus for some of the less contentious bills.

The Fiscal Cliff: Sequestration and the expiration of the Bush tax cuts
When Congress passed the Budget Control Act(BCA) of 2011(P.L. 112-25) it created a bicameral bipartisan committee, the Joint Select Committee on Deficit Reduction or super committee charged with developing a budget proposal that would reduce federal spending by $1.2 trillion over ten years.  The BCA also included the provision that if the super committee failed to produce a spending reduction plan or if the Congress failed to pass the super committee plan, automatic spending cuts of $1 trillion over 10years divided between defense and nondefense programs would be triggered on January 2, 2013.  Since the Joint Select Committee on Deficit Reduction process failed these automatic cuts referred to as sequestration will go into effect unless congress and the administration agree to modify the law.

Because of the lack of clarity on the magnitude of the sequestration cuts, earlier this summer Congress passed the Sequestration Transparency Act of 2012 requiring the President to submit to Congress a report.  On September 14th the Office of Management and Budget (OMB) issued its report on sequestration in accordance with the Sequestration Transparency Act of 2012.  The OMB report details account by account the size of the cuts and the percentage of cuts if sequestration is triggered. 

The Administration and most members of Congress concur that all efforts should be taken to avoid sequestration.  Sequestration would result in a 9.4% reduction in non-exempt defense discretionary funding and an 8.2% reduction in non-exempt nondefense discretionary funding.  Sequestration would also impose cuts of 2% to Medicare, 7.6% to other non-exempt nondefense mandatory programs, and 10% to non-exempt defense mandatory programs.  It is widely agreed that sequestration would undermine investments vital to economic growth, threaten the safety and security of the American people, and cause severe harm to programs that benefit the middle class, seniors and children.  Education grants supporting state and local school districts, afterschool programs and children with disabilities would suffer.  The Department of Agriculture’s efforts to inspect food processing plants and prevent foodborne illnesses would be curtailed.  The Environmental Protection Agency’s ability to protect drinking water would be degraded.  The National Institutes of Health would have to halt or delay scientific research, including needed research into cancer and childhood diseases.

In view of the bipartisan consensus on the need to avoid sequestration it is expected that an effort will be made during the lame-duck session to resolve the issue. The President has announced he will veto any bill that simply postpones sequestration believing the lame-duck session is the best time to resolve this issue.  Postponement will simple “kick the can down the road” and continue to consume Washington when Congress and the Administration should begin working on other issues.

Resolution of the issue is being addressed by a bipartisan Senate Group of 8 who have begun discussions to forge a compromise to deal with expiring tax cuts and avert sequestration by developing a balanced percentage of tax and entitlement reform, spending cuts and new revenues.  The House will likely wait until after the elections to begin talks of compromise. 

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