Federal Relations

January 24, 2012

FY13 Budget Outlook

President Obama will release his FY13 budget on February 13th this year, one week late. Under the law, the budget is to be released on the first Monday in February but yesterday the Office of Management and Budget (OMB) announced that they would be releasing the budget late. The Obama administration also delayed the release of the budget last year, waiting until February 14th. OMB offered no reason for the delay, but it’s not unusual for the administration to push back the date, this being the third time it has done so. President Obama is expected to offer some broad outlines of his budget this evening in the State of the Union address. The Congressional Budget Office meanwhile, will provide detailed spending and economic projections for the next 10 years on January 31st, when it releases its annual budget and economic outlook for fiscal years 2013-22.

The President’s budget request will urge lawmakers to come up with $1.2 trillion in spending cuts and scrap the automatic reductions known as sequesters that are due to kick in next year. Despite the failure of last year’s joint deficit committee, Obama has urged lawmakers to continue seeking ways to cut the deficit rather than face the automatic budget cuts mandated by last year’s agreement to raise the debt ceiling. During his State of the Union address, the President is likely to offer the broad outlines of his deficit-reduction plan. If lawmakers were to reach an agreement on deficit reduction, they would have to amend the Budget Control Act to turn off the sequester. Unless the law is changed, OMB will implement the sequester in January 2013 that would cut discretionary spending by a projected $97 billion in that year (7.8% cut to the overall FY13 budget). The law calls for annual sequestrations totaling almost $1 trillion and saving $1.2 trillion, including reduced interest costs, through fiscal 2021.

Members of congress from both parties say they are hoping to reach a deal with the President to negate the automatic cuts, or substitute another deficit-reduction package for them, before they take effect in January 2013. But because of the elections this fall, it seems most likely that the sequestration will be dealt with after November, leaving plenty of uncertainty in the months ahead.