This Federal Update will focus on these fiscal issues, and also take a look ahead at the congressional agenda for spring.

Sequestration

As you are all aware by now, Congress allowed sequestration to take effect on March 1^st 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 21^st, 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 27^th. 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 8^th 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.

To keep up with the latest from Washington, D.C., check out the UW Federal Relations blog and Facebook page.

With the final passage of the CR today, this is likely the end of any discussions to eliminate or replace the sequester for this year.

Both the House and Senate will spend most of today focusing on their respective FY 2014 budget resolutions as they try to get those measures approved before they begin their two-week recess period on Friday. The budget resolution provides instructions to the appropriations committees in both chambers as to how much each federal agency will have to spend for the upcoming fiscal year. Appropriators use these guidelines to craft spending bills for the upcoming fiscal year that direct how each agency must use their funds. The House and Senate budget plans will likely establish different overall spending priorities making it difficult for appropriators in both chambers to come to resolution on final bills by September 30^th.

Meanwhile, the House is scheduled to take action on their FY 2014 budget resolution today. The two chambers have wildly different budget measures to consider, which will make reconciliation between the two very challenging. The House plan is written to balance the budget in 10 years and cut the deficit by $5.7 trillion between FY 2014 to FY 2023. The Senate plan would cut the deficit by only $1.8 trillion over 10 years. But even if the House completes their work on the budget before Friday, they will need to stick around to take final action on the CR that the Senate is still debating since they can’t go home without also acting on the stopgap measure, which is required to avoid government shutdown before the current CR expires on March 27^th.

The CR is critical at this point as federal agencies are looking to that legislation to help them adapt to across-the-board spending cuts required by the sequester. Neither chamber has made attempts to overturn sequestration, but instead the focus has been to update the base from which the cuts are made by providing departments with more detailed full-year appropriations. This will give some agencies some flexibility in implementing cuts.

The Senate resumes consideration of the CR to fund the federal government for the rest of FY 2013. With some 90 amendments filed, they may need to vote on cloture in order to move the process forward as the bill will have to go back to the House for final consideration before the end of the week. The current CR expires on March 27^th, but both chambers intend to be out on recess starting this Friday.

On the heels of the CR votes, the House and Senate will both take action on their respective budget resolutions for FY 2014. The House is expected to adopt their FY 2014 budget resolution by the end of the week that calls for reducing projected spending as well as cutting the deficit by $5.7 trillion from FY 2014 to FY 2023, when compared with the baseline for future spending and tax receipts projected by the Congressional Budget Office. The savings would come from cuts in domestic programs, repealing the 2010 health care law, and overhauling the tax code.

The Senate plan, on the other hand, would cut the deficit by only $1.8 trillion over 10 years. The Democrats proposal calls for replacing all nine years of the sequester with what they are calling a “balanced” package of tax increases and spending cuts, while sparing entitlement programs.

The two budget proposals are wildly different, so much so that there is little hope that the two chambers will be able to reconcile their differences before launching the FY 2014 appropriations process. This means that the House and Senate may work off of different baseline numbers and assumptions for developing their FY 2014 bills to fund federal government.

Military TA programs provide up to $4,500 per year for active-duty troops who are attending high school completion courses and certificate programs, or are working toward college degrees. According to the Army, 201,000 soldiers took advantage of the Army’s TA program in fiscal year 2012. The TA program provided $373 million, helping 2,831 soldiers earn associate degrees, 4,495 earn bachelor degrees and 1,946 receive graduate degrees.

The Navy and the Air Force are considering similar cuts, but as yet, have not publicly decided to follow suit.

UW estimates this will keep 100 soldiers from using TA in the Spring Quarter across all three campuses.

There are a few interesting sections in the bill that are of interest to us. First, the bill would provide a $71 million increase for NIH and requires an Institute of Medicine/National Research Council review of the National Children’s Study. Additionally, NSF would be funded at $7.25 billion, an increase of $221 million above the FY 2012 enacted level. This level will allow NSF to make about 550 more grants supporting 7,000 scientists, teachers, students, and technicians who make new discoveries leading to new products, new companies, and new jobs.

A full summary of the FY 2013 Senate Substitute CR is available on the Senate Appropriations Committee website.

The Senate is scheduled to take action on their version of the CR this week. The House passed their version last week. This will leave just one week before the Easter recess begins on March 22^nd for House and Senate leaders to come to agreement on a final version.

The Office of Federal Relations is encouraged to see the small increases in NIH and NSF funding and will continue to advocate to investments in university research.

Both chambers will also focus on their respective budget proposals this week. The House Budget Committee marks up its budget resolution Wednesday, while the Senate Budget panel will consider its plan Thursday. Both 10-year budget plans are expected to be on the floor the week of March 18 and are on course to be adopted well in advance of the April 15 deadline imposed by Congress earlier this year. Both budgets are viewed as vehicles to promote partisan agendas, and almost no one believes that the two sides will be able (or willing) to reconcile the different assumptions made in each budget on how to increase revenues and how to invest those new revenues.

And as reported late last week, the White House is now not expected to send its budget to Congress until April 8^th, more than two months late. By law, the president is required to deliver his budget proposal to Capitol Hill no later than the first Monday in February, but there is no penalty for being late. The Administration blames the delay on last year’s fiscal uncertainties, including the fiscal cliff deliberations, sequestration, and the CR.

And finally, a sequester update. As a reminder, the $85 billion cut from federal spending this fiscal year is only the first installment of nine years of sequester. Even as Congress and the White House negotiate how to mitigate the impacts of the sequester, it is good to know that they are only discussing relief for FY 2013, which would represent a down payment on the more difficult spending questions that will arise as more than $700 billion in additional reductions mount in the ensuing nine years. It will become harder and harder for Congress to mitigate the impacts of sequestration as the largest share of the spending cuts will fall on discretionary programs – like research and education assistance – the portion of federal operating expenses that now make up just a third of the federal budget today and would, under sequester, fall to about a quarter of spending by the end of the decade.

The Office of Federal Relations is actively collecting information from campus on direct and indirect impacts of the sequester to use for our advocacy efforts. It is important that the UW community have a unified voice and message on these impacts. Please contact us if you are experiencing any changes in commitment on your grants or contracts.

All of this activity won’t keep the House from considering their legislative proposal to fund government for the remainder of FY 2013 (the current continuing resolution expires on March 27th). This morning the House will consider both the rule for and passage of the CR to fund the government, with votes wrapping up between 1:00pm and 1:30pm, which should give most members time to get out of town before the bulk of the snow hits the ground. Of course, this probably won’t help members like ours on the west coast as airports in the area have already started cancelling outbound flights.

The House is expected to pass the $984 billion CR today but it does not include much language to soften the blow of the sequester that went into effect last Friday. While it will give the Defense and Veterans Affairs departments more flexibility in implementing cuts, in addition to providing a few extra dollars for each, the proposal will do little to blunt the impact of sequestration on education and research programs.

The House bill would effectively cap regular FY 2013 discretionary spending at about $984 billion, with the sequester triggered on March 1st automatically slicing about $59 billion from the bill’s starting level of $1.043 trillion. That’s somewhat more spending than the $974 billion estimate offered by House Republicans before March 1st when the Office of Management and Budget released its final call on the sequester’s effects. The numbers changed after OMB removed the expenses of programs exempt from sequester, such as military pay, the Department of Veterans Affairs, and Pell grants, and added in other money that had not been included in the original assessment of federal spending, such as some unobligated balances.

The Senate may try to move stand alone bills to fund some areas of government rather than just approving another CR. So far they have made some progress on bills to fund Agriculture, Commerce-Science-Justice, and Homeland Security. With only two more working weeks before the two-week Easter recess it is hard to imagine that they will be able to accomplish this and also get the House to agree to that process.

SEQUESTRATION ORDER FOR FISCAL YEAR 2013 PURSUANT TO SECTION 251A OF THE BALANCED BUDGET AND EMERGENCY DEFICIT CONTROL ACT, AS AMENDED

By the authority vested in me as President by the laws of the United States of America, and in accordance with section 251A of the Balanced Budget and Emergency Deficit Control Act, as amended (the “Act”), 2 U.S.C. 901a, I hereby order that budgetary resources in each non-exempt budget account be reduced by the amount calculated by the Office of Management and Budget in its report to the Congress of March 1, 2013.

Pursuant to sections 250(c)(6), 251A, and 255(e) of the Act, budgetary resources subject to sequestration shall be new budget authority, unobligated balances of defense function accounts carried over from prior fiscal years, direct spending authority, and obligation limitations.

All sequestrations shall be made in strict accordance with the requirements of section 251A of the Act and the specifications of the Office of Management and Budget’s report of March 1, 2013, prepared pursuant to section 251A(11) of the Act.

BARACK OBAMA

THE WHITE HOUSE,

March 1, 2013