Update from Washington, D.C. 02/18/2011
President Obama released February 14 his $3.73 trillion fiscal
year 2012 budget request to Congress, maintaining the plan would
shave the deficit by more than a $1 trillion over the next
decade. Under the proposal for next year, overall spending would
drop by 2.7 percent from the $3.8 trillion the president had
proposed for the current fiscal year.
Under the Obama administration’s budget plan, the deficit for fiscal year 2012 would be $1.1 trillion, compared to a projected deficit of $1.65 trillion this year.
With mounting pressure to rein in soaring budget deficits, President Obama’s funding proposal provides for a five-year freeze in overall domestic discretionary spending at fiscal year 2010 levels, though the president would cut specific programs to pay for some of his new initiatives. According to the White House, the proposed freeze would save an estimated $400 billion over 10 years.
However, some programs would be sheltered from the freeze, including education, biomedical research and other priority programs. In fact, these programs would actually realize a boost in funding under the president’s spending recommendations.
While the freeze proposal has attracted a lot of attention, it would only affect a small portion of the overall federal budget, the majority of which is devoted to entitlement programs such as Social Security, Medicare, and Medicaid. Nevertheless, with the public anxious about the ballooning budget deficit, the White House is eager to demonstrate a commitment to reducing federal spending.
On the revenue side of the ledger, Obama’s budget request for next year calls for a series of tax increases, including hikes for the oil, gas and coal industry, as well as investment managers and multinational companies based in the United States. Additionally, the budget plan would permit the so-called Bush tax cuts to expire on December 31, 2012 for individuals earning more than $200,000 and married couples making more than $250,000 annually. A number of itemized deductions would also be limited for high-income taxpayers.
With the unveiling of President Obama’s budget priorities, the action now shifts to Capitol Hill, where lawmakers will cobble together their own spending model. Although fiscal year 2012 begins October 1, seldom are all 12 appropriations bills approved before the start of the new fiscal year. In fact, not one fiscal year 2011 spending measure has been finalized for the current year as the government has been operating under a stopgap continuing resolution (CR), which expires on March 4.
The Obama Administration’s Fiscal Year 2012 Funding Priorities
President Obama’s fiscal year 2012 budget recommendation includes a number of program and spending items of interest to California’s counties. Particularly noteworthy is the administration’s proposal to reauthorize the nation’s surface transportation law, SAFETEA-LU. President Obama’s budget plan calls for a six-year, $556 billion surface transportation reauthorization bill, which would consolidate 55 highway programs into five. Additionally, the president’s transportation initiative would merge rail spending within the Highway Trust Fund to create a Transportation Trust Fund (TTF). The proposed TTF would be comprised of four separate accounts (highways, transit, high-speed rail, and the National Infrastructure Bank).
Listed below are some of the other key federal programs of interest to local governments and President Obama’s funding and/or policy requests for next year. It should be noted that because Congress has not finalized the fiscal year 2011 appropriations bills, the current year level of funding for federal programs and activities is not known at this time. Therefore, the latest year to compare funding levels to is fiscal year 2010, though in some cases fiscal year 2011 is referenced.
- The Obama administration recommends $328 million in discretionary funds for the first year of a five-year reauthorization of the Secure Rural Schools and Community Self-Determination Act (SRS). Over its current four-year authorization (fiscal years 2008-2011), SRS provides an annual average of $433 million to counties and schools.
- The administration’s budget request calls for the elimination of the 25 percent county share of geothermal revenues.
- President Obama’s budget plan provides $136 million for the State Criminal Alien Assistance Program (SCAAP), a $194 million reduction from the fiscal year 2010 funding level.
- The president’s budget recommends $1.1 billion for the State Homeland Security Grant Program.
- The administration is seeking $920 million for the Urban Area Security Initiative (UASI), slightly less than the president’s fiscal year 2011 budget request.
- Overall, the Obama budget plan would provide $1.17 billion for state and local law enforcement assistance programs; compared to $1.6 billion in the fiscal year 2011 continuing resolution.
- The administration is not requesting funding next year for the Southwest Border Enforcement Initiative for law enforcement and prosecutorial efforts on the U.S.-Mexican border to combat violent crime, gun smuggling, and illicit drug trafficking.
- The Community Development Block Grant (CDBG) program would receive a cut of $300 million, a 7.5 percent reduction from fiscal year 2010.
- Although the Temporary Assistance for Needy Families program is due for reauthorization this year, the administration did not submit any policy proposals in its budget document. It did, however, express interest in working with Congress to build upon the recent success of the subsidized employment program enacted in the American Recovery and Reinvestment Act.
- The administration proposes a new initiative of $250 million in incentive-based funds to make improvements in foster care by rewarding efforts to reduce the length stays in foster care; increasing stable placements through reunification, adoption, and guardianship; and reducing rates of re-entry into foster care.
- Similar to last year’s budget, there are very few legislative and no apparent regulatory changes proposed for Medicaid. There is a proposal in the long term (beginning in fiscal year 2021) to again reduce funding for the disproportionate share hospital payment program (DSH) for hospitals serving large numbers of the uninsured and Medicaid individuals. This budget strategy would extend the DSH savings that would otherwise expire under the Affordable Care Act.
- President Obama proposes to freeze funding at $140 million the Independent Living Program for Youth. The program has been funded at that level for a number of years.
- Authorized under the Elder Justice Act, the administration is requesting first-time federal funding for Adult Protective Services (APS). The request for $16.5 million includes approximately $13 million to fund competitive grants to test promising approaches to meeting the growing challenges that State and local APS programs face.
- The request for the Child Care and Development Block Grant (CCDBG) is $2.9 billion — an increase of $800 million. The request also includes $3.4 billion for the Child Care Entitlement to States, an increase of $500 million over last year.
- The administration proposes to cut the Community Services Block Grant funding in half, to $350 million. Program funding would be distributed to Community Action Agencies via competitive grants.
- The president proposes to cut the Low Income Home Energy Assistance Program (LIHEAP) by nearly 50 percent to the fiscal year 2008 level of $2.57 billion, $3.3 billion down from the recession-induced level of $5.1 billion in fiscal year 2010.
- The Obama administration did not renew its proposal to extend the ability of states and counties to use as federal match their child support earned performance incentive funds. It does, however, propose a $300 million temporary increase in the amount of incentive payments available to be drawn down, based on performance.
- Older American’s Act Programs: The administration proposes a 13 percent increase, to $416 million, for home and community-based services under the Older Americans Act (OAA). All other OAA programs would be essentially funded at last year’s levels.
- Workforce Investment Act (WIA) adult employment and training funding would be frozen at $860 million, close to the fiscal year 2010 level. The request includes last year’s proposal to carve out funding from the adult, dislocated and youth employment and training programs to initiate a $295 million Workforce Innovation Fund (WIF), to test job training reforms. The administration request essentially freezes funding for the Dislocated Worker and Youth programs.
- The administration proposes to fund the Social Services Block grant (Title XX) at $1.7 billion, the same level appropriated for a number of years.
- Under the budget request, the Mental Health Block Grant would receive a $14 million increase to $435 million next year. Children’s mental health would be frozen at the current level of $121 million.
- The Substance Abuse Treatment block grant would be essentially frozen at last year’s level of $1.9 billion.
Of course, Congress is likely to modify a number of provisions
included in President Obama’s fiscal year 2012 budget proposal,
especially with the new Republican majority in the House. In
fact, some GOP lawmakers have already declared that the
president’s budget request for next year is “dead on
The Fiscal Year 2011 Continuing Resolution
In other major budget news, the full House considered the week of February 14 the fiscal year 2011 appropriations bill (HR 1), which would fund federal government operations through September 30. Republican leaders are aiming to finish the fiscal year 2011 continuing resolution, or CR, by the end of the week, when both the House and Senate are expected to leave town for a one-week recess in honor of President’s Day.
Emboldened House Republicans are aiming to shave $100 billion from the Obama administration’s fiscal year 2011 budget request, though GOP leaders initially produced a plan that would have sliced $74 billion from the president’s spending proposal. Many freshmen Republicans refused to support GOP leaders $74 billion cut, arguing that the leadership’s proposed spending cuts were simply not sufficient.
However, relative to current funding for fiscal year 2011, which is now governed by a continuing resolution that expires on March 4, the cuts come out to roughly $58 billion, according to the House Appropriations Committee.
House members filed 583 amendments prior to the printing deadline, though only a handful had been adopted at press time, including the following:
- An $80 million increase for the Commerce Department’s economic assistance programs.
- Boost funding by $298 million for the Community Oriented Policing Services.
- Increase spending for firefighter assistance grants by $510 million.
- Slash funding for the Environmental Protection Agency’s State and Tribal Assistance Grants by $10 million.
- A $2 million reduction for the Bureau of Reclamation’s water and related resources.
After the House clears its version of the continuing resolution,
the measure will move over to the Senate side of the Capitol,
where Democratic leaders are expected to give it a rather chilly
reception. To be sure, the House CR is likely to be substantially
reworked by the Senate. For his part, President Obama has vowed
to veto the House CR, maintaining that it seriously threatens the
With the March 4 expiration date rapidly approaching, another short-term CR will be needed to keep the government operating, giving House and Senate negotiators additional time to forge a compromise.
A number of transportation hearings were held on Capitol Hill the week of February 14, as lawmakers work to develop a long-term surface transportation reauthorization bill. A key component to any emerging legislation will be improving the streamlining of projects from planning to construction.
In the House, Highway and Transit Subcommittee Chairman John Duncan (R-TN) held a hearing to kick off a series of public hearings and discussions around the country that seek to address streamlining project delivery. Committee members heard testimony from a number of federal, state and local representatives, including several officials from Orange County.
On the other side of the Capitol, Senate Environment and Public Works Committee Chairwoman Barbara Boxer (D-CA) held a hearing to discuss surface transportation issues. The two panel witnesses included leaders from the U.S. Chamber of Commerce and the AFL-CIO, who issued a joint statement that declared the need for a strong transportation bill. In addition, Chairwoman Boxer announced that the committee, along with the House Transportation and Infrastructure (T&I) Committee, will be holding a joint Senate-House hearing in Los Angeles on February 23 that will address infrastructure improvement proposals.
In other developments, the T&I Committee passed a short-term extension that would continue current surface transportation programs at fiscal year 2010 funding levels to the end of the fiscal year. The extension, which prevents programs from expiring in March, would allow lawmakers additional time to work on a long-term reauthorization.
On the aviation front, the Senate approved February 17 its Federal Aviation Administration (FAA) reauthorization bill, which includes funding for the Airport Improvement Program (AIP) and the Essential Air Service (EAS) program. The Senate’s two-year measure (S 223) continues the EAS program after defeating an amendment by Senator John McCain (R-AZ) to eliminate the subsidy.
On the House side, Transportation and Infrastructure Committee Chairman John Mica (R-Fla.) unveiled February 11 a nearly $60 billion bill (HR 658) to reauthorize the FAA through 2014. Wasting little time, Chairman Mica placed HR 658 on the “fast track” as the full committee approved the legislation February 16. The bill is expected to be considered on the House floor when lawmakers return from their recess the week of February 28.
Under the House bill, AIP grants would receive an average of $3 billion annually, compared with $4 billion in the first year the Senate’s version of the FAA reauthorization. Also, Chairman Mica’s reauthorization legislation would sunset the EAS program as of October 1, 2014, except in Alaska and Hawaii.