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FY 2013 Budget & Appropriations this Week

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Budget:  With the House in recess last week, work continued behind the scenes to draft the FY 2013 budget resolution which is expected to be marked up this week.  This budget resolution is likely to propose deeper spending cuts in an effort to balance the budget more quickly. Conservatives have been pushing to get the discretionary limit down to $931 billion, more than $100 billion below the $1.047 trillion discretionary spending cap in the Budget Control Act (PL 112-25). The resolution may also include provisions aimed at limiting the impact of sequestration, the automatic spending cuts scheduled to begin in January of 2013 that would result in just under $100 billion in defense and non-defense discretionary spending reductions.  Any effort to address sequestration through this budget resolution or subsequent legislation will likely come down to a tug-of-war between protection of defense spending vs. protection of entitlements.

Appropriations:  Appropriators in both chambers will hear from a series of Cabinet officials and agency leaders throughout the week, continuing a busy schedule of hearings that have touched on the administration’s FY 2013 budget request as well as its policies.  Among the officials set to testify before Appropriations subcommittees this week are U.S. Ambassador to the United Nations Susan E. Rice, Commerce Secretary John Bryson, Small Business Administration Administrator Karen G. Mills, National Institutes of Health Director Francis S. Collins, NASA Administrator Charles F. Bolden Jr., Housing and Urban Development Secretary Shaun Donovan, and Education Secretary Arne Duncan.

This Week in DC

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Budget

The House Budget Committee will mark up its FY13 budget resolution by the third week of March, with Republican leaders hoping to have it adopted by the end of the month. The House plan is expected to propose discretionary spending for FY13 that is lower than the $1.047 trillion level set by last August’s Budget Control Act (PL 112-25). The Senate Budget Committee, meanwhile, will try to draft a resolution by early April that offers a plan for long-term deficit reduction based on the work of earlier bipartisan fiscal commissions. Senate Democratic leaders have said the resolution will not come to the floor and that they intend to adhere to the caps set by the Budget Control Act as they write their FY13 appropriations bills.

Appropriations

Member of President Obama’s Cabinet and other agency officials will be on Capitol Hill throughout the week to defend the policy decisions and spending priorities contained in their FY13 budget requests.  Among the officials set to appear before Appropriations committees this week are Secretary of State Hillary Rodham Clinton, Defense Secretary Leon Panetta, EPA Administrator Lisa Jackson, Attorney General Eric Holder, Energy Secretary Steven Chu, Housing and Urban Development (HUD) Secretary Shaun Donovan, and Health and Human Services (HHS) Secretary Kathleen Sebelius.

President Michael Young in DC

President Young will be in DC to deliver the UW’s FY13 Federal Legislative Agenda to the Washington state Congressional Delegation.  That agenda recognizes the constrained federal resources while maintaining a strategic focus on those initiatives, programs, and projects that will contribute to a sustainable and competitive future for the UW, the state, and the nation.  Specifically, our agenda calls on Congress to make continued, targeted investments in federal student aid and research.

Congress in Recess this Week

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Congress is in recess this week for President’s Day and will return to the Capitol next week – the same week that UW President Michael Young will be in DC for his annual visit to the Washington State Congressional Delegation.  Last Monday, the President submitted his FY13 budget to Congress.  Next week, President Young will submit the University’s FY13 Federal Legislative Agenda to the delegation.  I will provide a full report after these meetings so stay tuned!

Now back to the President’s Budget Request (PBR).  The overall budget request is $3.8 trillion, which takes into account the $1.047 trillion cap on domestic spending as agreed to in the Budget Control Act (approved last August to deal with deficit reduction and raising the debt ceiling).   Included in this overall number is $64 billion for basic and applied research, a 3.3 percent increase from FY12 enacted levels. The request includes increases for most basic research accounts, including those at the National Science Foundation (NSF), the Department of Energy (DOE), and the Department of Defense (DoD). The National Institutes of Health (NIH), however, remains level funded and NASA’s Science Directorate is reduced. The majority of smaller research agencies (e.g., National Institute of Standards and Technology (NIST, USGS, and others) receive increases from FY12.

One thing to keep in mind about the PBR is that this is a very political document – especially in an election year. In addition to outlining the President’s spending priorities, it also includes a number of controversial proposals to pay for that spending (particularly regarding taxes).  This will be a tough sell to Congress. While the appropriations process began in earnest this past week, it is highly unlikely that this budget request will be anywhere close to realized before the election in November.  Instead, the House and Senate budget writers and appropriators will outline their own spending priorities with only minor acknowledgment of the PBR.

Read more about the PBR here or contact the Office of Federal Relations to receive our most recent Federal Update (2/15/12) on this topic.

FY13 Budget Supports Research, Student Aid

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The Obama Administration’s FY13 budget, released on February 13, reflects a continuing commitment to increased federal investments in research and education.  The budget would increase funding for the National Science Foundation (NSF); the Department of Energy’s (DOE) Office of Science and ARPA-E; and the Agriculture and Food Research Initiative (AFRI) in the Department of Agriculture, which supports competitive research.  It also would provide a modest funding increase for the National Endowment for the Humanities (NEH).  Similarly, funding for basic research at the Department of Defense (DOD) is essentially level despite significant cuts elsewhere in the agency. 

Funding for the National Institutes of Health (NIH) would be essentially frozen at the FY12 level.  The science portfolio at NASA would be cut by more than three percent.  

For student aid, the Administration would fully fund the maximum Pell Grant level of $5,635 and extend the 3.4 percent interest rate on subsidized Stafford loans, which otherwise would rise to 6.8 percent on July 1, 2012.  Additionally, the Administration would shift campus-based aid programs, such as Perkins Loans, toward institutions that “keep their tuition and tuition increases low,” enroll relatively high numbers of Pell-eligible students, and provide “good value.”  No additional details are available on exactly how the Administration would implement this.

The FY13 budget also contains several tax proposals of interest to research universities.  These include making the American Opportunity Tax Credit permanent and limiting the value of certain tax expenditures, including the deduction for charitable contributions for individual taxpayers, to 28 percent.  The budget would also expand the Build America Bonds program by making the program permanent, expanding eligibility to both government entities and nonprofit institutions—including both public and private universities—and expanding the allowed uses of the bonds.

FY13 President’s Budget Request

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The President is scheduled to deliver his FY13 budget request to Congress later this morning, kicking off the annual budget and appropriations season. While the details of the budget have remained under wraps until today, the Office of Management and Budget (OMB) released a 2013 “Fact Sheet” on Friday revealing that the budget will include strong support for research and development, including “$140.8 billion for R&D overall; increase the level of investment in non-defense R&D by 5 percent from the 2012 level, even as overall budgets decline; maintains the President’s commitment to double the budgets of three key basic research agencies (National Science Foundation, Department of Energy’s Office of Science, and National Institute of Standards and Technology Laboratories); expands and makes permanent the R&D tax credit. [Includes] Level funding for biomedical research at NIHNational Institutes of Health ($30.7 billion); and to get more out of the money, proposes new grant management policies to increase the number of new research grants by 7 percent.”

The President will also request $4 trillion in deficit reduction over the next decade in his FY13 budget, but his proposal to pay for it with revenue increases and spending cuts — already rejected by the special deficit reduction panel last fall — will make it tough to sell to Congress. Half of the deficit reduction would come by increasing revenues, including raising $1 trillion over 10 years by increasing taxes on families earning more than $250,000. Obama’s proposal would cut the deficit to $901 billion by the end of FY13, or about 5.5 percent of the gross domestic product. All told, his proposal would reduce accumulated debt by $3 trillion in addition to the $1 trillion in savings over 10 years already put in place by the BCA. If approved, Obama’s plan would void the automatic across-the-board cuts— known as a sequester— due to kick in January 2013.

Once the budget request is delivered to the Hill, both the House and Senate canCures Acceleration Network begin the annual appropriations process. The usual first step in that process is for both chambers to approve a budget resolution, which gives appropriations committees their top-line numbers on how much to appropriate. This year, however, Senate Majority Leader Harry Reid (D-NV) has announced that he won’t move a budget resolution to the floor, even if the Senate Budget Committee approves one, since the Budget Control Act (BCA) approved last August already specified the top-line number for FY13. In the House, Budget Committee Chairman Paul Ryan (R-WI) will move a budget resolution through his committee, which will likely specify a top-line number even less than what was agreed to in the BCA.