March 25, 2013
Federal Update, March 2013
The month of March has been a busy one in Washington, D.C. On March 1st sequestration went into effect after Congress failed to come to agreement on long-term deficit reduction, and last week both the House and Senate approved their respective budget resolutions that address overall spending for federal government for FY 2014. And, finally, Congress took action on a continuing resolution to fund the federal government for the remaining six months of FY 2013, just a week before the current CR expires on March 27th. Congress is now enjoying a two-week recess period before returning to work on April 8th, the same day that President Obama is to release his FY 2014 budget request, two months later than usual because of all of the fiscal uncertainty in Congress.
This Federal Update will focus on these fiscal issues, and also take a look ahead at the congressional agenda for spring.
As you are all aware by now, Congress allowed sequestration to take effect on March 1st as they were unable to come to any agreement on a long-term deficit reduction plan. Now federal agencies will make cuts of about 9 percent for most nondefense discretionary programs and 13 percent for defense programs. This represents $85 billion in spending cuts over the remaining months of FY 2013, and an overall reduction of $1.2 trillion in spending cuts and savings over the next decade. Federal agencies are currently in the process of determining how they will implement their cuts across programs. The UW Office of Research is currently collecting this information and advising the campus community of potential impacts (Please click here for document).
The research community had hoped that Congress would modify the sequester through their work on the CR, and provide some relief to science agencies. Unfortunately that did not happen and there is not likely to be any further attempts to modify the sequester for FY 2013.
FY 2013 Spending Package Completed
The House gave final approval to the FY 2013 spending package (HR 993) on March 21st, sending the bill to the President for signature. Passage of the bill was necessary to sustain federal funding through the remaining six months of FY 2013 and avoid a government shutdown after the current CR expires March 27th. The House vote came the day after the Senate passed the bill by a strong bipartisan vote of 73 to 26, having reached a deal earlier to limit amendments.
The original House-passed bill included full-year bills for two of the 12 appropriations measures—Defense and Military-Construction-Veterans Affairs—which provided the Defense and Veterans Affairs Departments updated spending priorities and greater flexibility to manage their sequester cuts. The Senate package accepted those two bills and added the FY 2013 funding bills for Agriculture, Homeland Security, and Commerce-Justice-Science, three bills that the House and Senate had largely agreed on. The appropriations bills move funds around and provide additional management flexibility, but they do not negate the sequester for those agencies.
The final FY 2013 funding package included funding and program changes for several research agencies and student aid programs, through both the appropriations bills included in the package and budget anomalies for programs funded through the CR.
- National Science Foundation (NSF): The bill added $221 million for NSF in FY 2013, raising the agency’s budget to $7.254 billion. After sequestration, however, the agency’s budget will be $6.884 billion. FY 2012 funding was about $7.033 billion so the CR represents a reduction in overall funds for NSF.
- National Institutes of Health (NIH): NIH was funded through the CR, but an anomaly in the bill increased the agency’s budget by $71 million, before implementation of the $1.6 billion in sequester cuts. NIH funding in FY 2012 was about $31 billion.
- Department of Energy Office of Science: An anomaly added in the Senate bill CUT $44 million from the Department of Energy, before the sequester. That amounted to cuts of $13 million from the DOE Office of Science, $10 million from ARPA-E, $11 million from Energy Efficiency and Renewable Energy, and $10 million from Nuclear Energy. (In FY 2012, the DOE Office of Science budget was $4.84 billion, ARPA-E was $275 million, EERE was $1.8 billion, and Nuclear Energy was $765 million.) The sequester will mandate further cuts for all of these programs.
- Agriculture and Food Research Initiative (AFRI): The CR increased AFRI funding by $25 million to $290 million, before sequestration. The Department indicates that the sequester will reduce the budget to about $274 million, for an INCREASE of $10 million over FY 2012 funding.
- NASA: The measure funded the space agency at $17.52 billion, which agency officials estimate will be reduced to $16.65 billion per sequestration. This compares to the FY 2012 budget of $17.8 billion. Within the NASA post-sequester FY 2013 total, Science received $4.8 billion, a cut of $295 million from the FY 2012 level; Aeronautics received $531 million, a cut of about $39 million from the FY 2012 level; and Education received $116.5 million, a cut of $22 million from the FY 2012 level.
- Javits Fellowships: An anomaly allows continuation awards for Javits Fellowship recipients under the Graduate Assistance of Areas of National Need program, which Congress consolidated last year. The language enables 100 Javits recipients to receive their last year of funding.
During Senate floor consideration of the measure, the chamber also approved an amendment to require the military services to maintain their tuition assistance programs (TAP) for active-duty troops. The Defense Department had proposed to significantly cut funding for the programs to help adjust to budget cuts mandated by the sequester. The Army, Air Force, Marine Corps, and Coast Guard had already cut funding for their programs and frozen new applications. This amendment will require those branches of military to reinstate their TAP programs.
FY 2014 Budget Resolutions
Both House and Senate Budget Committees released their FY 2014 budget resolutions last week. The two plans are vastly different, although they do abide by the same overall spending caps established by the Budget Control Act of 2011. While neither measure stands a legitimate chance of gaining approval in the opposing chamber, there is hope that they could lay the groundwork for conference negotiations and a larger agreement on deficit reduction and/or tax reform in the fall.
The Ryan (House) Budget
House Budget Committee Chairman Paul Ryan (R-WI), proposed a budget resolution that balances the budget within 10 years and does not raise any new tax revenue. His budget contains no direct sequester fix, and cuts spending by an additional $4 trillion by turning Medicare into a voucher-like system, giving states more flexibility to run their health care programs, and reducing the non-defense discretionary spending cap more than $50 billion than the cap set by the BCA to $414 billion. The Ryan budget also significantly bumps up defense spending – which would effectively mitigate the impacts of sequestration for that sector. This would negatively impact agencies that typically provide for research funding and education programs. Some impacts to higher education and student aid funding include:
- Limiting the maximum Pell award of $5,645 through the 10-year period of the budget resolution (no increases);
- Eliminating the $5 per Pell Grant administrative fee provided to Institutes of Higher Education (IHEs);
- Considering a maximum income cap on Pell eligibility;
- Eliminating less than half-time Pell grant awards;
- Increasing the amount of time a student must attend class before withdrawing and triggering the return of Title IV funds;
- Removing regulatory barriers that restrict flexibility, especially around online coursework;
- Eliminating the administrative funding for IHEs under the campus based aid programs;
- Repealing recent expansion of the Income-Based Repayment (IBR) program done as part of the Student Aid and Fiscal Responsibility Act (not eliminating IBR completely);
- Repealing funding for the College Access Challenge Grant, and;
- Moving funding for the Community College/TAA grant from mandatory to discretionary.
The House approved their budget last week by 221-207 on a mostly party-line vote.
The Murray (Senate) Budget
The Senate Democrats’ budget introduced by Budget Committee Chair Patty Murray (D-WA) would raise tax revenues by about $975 billion over 10 years and cut the budget by an equal amount, reducing the deficit by a total of $1.85 trillion over the same time period. The cuts would include $275 billion from health care, $240 billion from defense, $142 billion from non-defense discretionary spending, and $76 billion from mandatory programs. Unlike the Ryan plan, the Murray budget does not aim to balance the federal budget, and it calls for replacing the sequester with a mix of different spending cuts and tax increases while adding about $100 billion in new spending on infrastructure and job training. Murray’s budget reflects the FY 2014 $966 billion spending cap set in place by the sequester law – allocating $497 billion for discretionary defense spending and $469 billion for discretionary domestic spending. The Senate budget also aims to protect higher education and innovation by:
- Increasing funding for programs for STEM education;
- Providing additional discretionary appropriations to cover future Pell program shortfalls in FY2015 and beyond, and;
- Permanently extending the American Opportunity Tax Credit related to higher education expenses.
Very early Saturday morning, the Senate passed its first budget in four years by a vote of 50 to 49 after a marathon session that began Friday morning and included 562 filed amendments.
Sally Jewell Nomination Moves Forward
Late last week, the Senate Energy & Natural Resources Committee approved the nomination of Sally Jewell for the Secretary of Interior. Jewell’s nomination will now move to the full Senate for consideration, likely sometime in mid-April.
What’s Next for Congress
Congress returns from their two-week Easter recess on April 8th and will get back to work on a variety of outstanding issues.
The Senate is expected to take up controversial gun legislation and executive nominations in April. The gun legislation will likely include background checks, gun-trafficking language, and school safety provisions.
House and Senate Appropriators will continue to move forward with the FY 2014 appropriations process. They have already held numerous hearings on their respective programs. Their return will coincide with the release of the President’s FY 2014 budget request for FY 2014 – more than two months overdue – which will help to inform the appropriations process through spring and into the fall.
Immigration reform is also expected to be a forefront issue. A group of eight Senators – four democrats and four republicans – have been working on a deal and expect to release a bill in mid to late April. A large portion of the proposal is expected to address guest-worker visas, particularly those for high-skilled occupations in the STEM fields. There are reports that the legislation will contain an agreement that would require undocumented immigrants who meet certain qualifications to wait 10 years for a green card and another three years for full citizenship.
Another fiscal issue will pop up in late Spring or early Summer when the country is expected to bump up against the debt ceiling limit (again). House Republicans this week indicated that they will demand dollar-for-dollar cuts for each dollar of increase in the debt ceiling – setting the stage for what may again be a lengthy fight over long-term budget issues.
Coming to DC?
Many faculty and staff are making their way to Washington, D.C. to participate in advocacy activities – especially in light of sequestration and the budget uncertainty expected to continue throughout the year. We urge you to contact the Office of Federal Relations to let us know about your visit and to let us help you craft your message – and to stay on the correct side of federal lobbying and ethics rules.