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December 13
​Budget Conferees Reach Agreement

On December 10, Senate Budget Chair Patty Murray (D-Wash.) and House Budget Chair Paul Ryan (R-Wis.) announced that they have reached a two-year budget agreement. The proposal put forth by the “budget committee,” titled the Bipartisan Budget Act of 2013, provides $63 billion in sequester relief over two years ($45 billion in FY2014 and $18 billion in FY2015), which is split evenly between defense and non-defense discretionary spending. The agreement brings the funding available for non-defense discretionary programs to $491.8 billion in FY2014 and $492.4 billion in FY2015. The deal also includes $85 billion in savings and revenue that will fully offset the sequester relief and reduce the deficit by roughly $22 billion.

Despite some opposition from individuals in both parties, the agreement passed the House on December 12 by a vote of 332-94. The budget deal will now go to the Senate, where it is expected to be approved next week. Once the bill is signed into law, appropriators intend to wrap up work on FY2014 spending bills before the current Continuing Resolution expires on January 15.

One of the biggest factors driving support for the bill is the fact that the agreement provides more certainty by restoring regular order to the budget process. Following the reveal of the Bipartisan Budget Act, House Appropriations Chair Hal Rogers (R-Ky.) stated to colleagues that the deal gives Congress’ an opportunity to reclaim its ability to direct spending.

The budget agreement would affect counties in several ways, most of which are positive:

  • By smoothing out an impending dip in federal discretionary spending, the agreement prevents a second round of cuts to programs of interest to counties, such as Payment in Lieu of Taxes (PILT), the Community Development Block Grant (CDBG) and justice and public safety programs.The bill also features a provision that establishes a deficit-neutral reserve fund for PILT and Secure Rural Schools, thereby indicating the importance of those programs to Congress.
  • The agreement does not include cuts to entitlement programs such as Medicaid or the Social Services Block Grant. In fact, it allows states to recoup costs from beneficiary-liability settlements, collect medical child support when health insurance is available from a non-custodial parent and allows states to delay payment of prenatal and preventive pediatric payments when a third party is responsible. These provisions are designed to make it easier for states and counties that have Medicaid and child support responsibilities to recover program costs.
  • For now, the tax exemption for municipal bond interest and the federal deduction for state and local taxes remain intact. Some thought that an overhaul of the federal tax code could be included in the budget deal. In recent weeks, however, it became all but clear that tax reform was going to be punted into 2014. 
  • Earlier this year, the Transportation Security Administration (TSA) announced that, beginning in July 2014, all airport operators would be responsible for monitoring all passengers as they leave secured boarding areas known as “sterile areas” – imposing a new cost on affected airports. The budget proposal addresses this issue by requiring TSA to continue monitoring airport exit lanes at airports currently receiving this service.
  • One issue that will still impact some counties will be Build America Bonds (BABs). Since the agreement only deals with discretionary spending and leaves the cuts to mandatory spending in place, the reduction in the subsidy payment for BABs issuers that began earlier this year remains unchanged. Furthermore, the budget deal extends the cuts to mandatory spending for two years; absent any future change, this will also extend the reduction in the subsidy payments to BABs issuers into 2022 and 2023.
  • The budget deal also changes the definition of long-term care hospitals, whereby at least 50 percent of their patients would have to come from Medicare. This definition could affect some county hospitals, but county nursing homes will not be affected.

The bill identifies several spending cuts and measures that will raise non-tax revenue, including:

  • ​Expanding the use of the Treasury Offset Program to all states so they can recover certain unemployment-insurance debts
  • Giving the Treasury Department the legal authority to obtain Prisoner Update Processing System data and making it available for those programs in which prisoners are ineligible for benefits
  • Repealing the Ultra-Deepwater and Unconventional Natural Gas and Other Petroleum Resources Research Program – a research and development program created in 2005
  • Making permanent a requirement that states receiving mineral revenue payments help defray the costs of managing mineral leases that generate revenue
  • Approving the U.S.-Mexico Transboundary Agreement, which sets up a framework to explore, develop, and share revenue from hydrocarbon resources
  • Limiting the amount of interest payable to lessees on federal oil and gas royalty overpayments
  • Rescinding all available funds in the Strategic Petroleum Reserve (SPR) Petroleum Account and permanently repealing the federal government’s authority to accept oil through the royalty-in-kind program to fill the SPR
  • Increasing federal-employee retirement contributions by 1.3 percent – affecting employees hired after December 31, 2013 with less than five years of service
  • Raising the premiums that private companies can pay the federal government to guarantee their pension benefits
  • Modifying the annual cost-of-living adjustment for working-age military retirees by making adjustments equal to inflation minus one percent – not affecting service members who retired because of disability or injury
  • Reducing the compensation guaranty agencies receive for rehabilitating a loan from the Federal Family Education Loan program, beginning July 1, 2014
  • Eliminating the mandatory spending for payments to non-profit student-loan services, instead ensuring they be paid in the same manner as other student-loan servicers
  • Increasing TSA fees and simplifying how fees are assessed
  • Repealing the requirement that the Maritime Administration reimburse other federal agencies for the extra costs associated with shipping food aid on U.S. ships
  • Allowing the Bureau of Customs and Border Protection to continue collecting user fees through FY2023
  • Limiting the amount a contractor can charge the federal government for an employee’s compensation to $487,000
  • Canceling a portion of unobligated balances in the Department of Justice’s Assets Forfeiture Fund and the Treasury Department’s Forfeiture Fund
  • Allowing the Natural Resources Conservation Service to charge a fee for providing technical and financial assistance on the development of individualized, site-specific conservation plans.

In addition, the bill requires the President to reduce $28 billion in additional spending by sequestering mandatory budgetary resources in 2022 and 2023.

A summary of the Bipartisan Budget Act of 2013 can be accessed here.

Contact: Marlina Sanz at msanz@naco.org 202.942.4260 or Jessica Monahan at jmonahan@naco.org or 202.942.4217

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