With the 112th Congress set to convene, deficit reduction will be of primary concern even in the face of a presidential election year. Looking back at how Congress tackled (or didn’t) the federal deficit can provide perspective as NACo works to protect county interests in this congressional session.
Major Budget Actions in 2011
During February and March, Congress adopted a Continuing Resolution avoiding a federal government shutdown. The budget included approximately $38 billion in reductions to 2011 domestic spending programs. The House Appropriations Committee originally announced cutting domestic discretionary programs by $40 billion. Republican freshmen and other fiscal conservatives insisted on $100 billion in cuts. The bill that was taken up by the House had approximately $60 billion was cut from the president’s FY11 budget request.
The bill targeted many programs of interest to counties for deep cuts or elimination, including adult and youth job training, the Community Development Block Grant, Community Services Block Grant, Juvenile Accountability Block Grant programs, and Community Health Centers. NACo lobbied hard to prevent draconian reductions as proposed, and the association and its allies worked to defuse the cuts. Legislative staff helped defeat an amendment to cut funding to the payment in lieu of taxes program (PILT) by 75 percent. The amendment was soundly defeated by a margin of 394 to 32.
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The legislation also sought to eliminate hiring grants for law enforcement and emergency personnel; however, amendments to provide $298 million for COPS hiring, and $510 million for SAFER grants restored funding for these important public safety needs.
Unfortunately, NACo has not been able to prevail in maintaining level funding. Over the past 12 months, Congress has reduced federal spending by about $47 billion, spread over two appropriations cycles. It completed overdue FY11 appropriations (PL 112-10), reducing almost $40 billion in discretionary spending from the previous year’s levels, and then trimming an additional $7 billion by the time it finished FY12 spending legislation (PL 112-74) in December.
During July and August, major debates on raising the debt limit led to passage of the Budget Control Act of 2011 (PL 112-25), which created the Congressional Joint Select Committee on Deficit Reduction (aka: “super committee”). The legislation included $900 billion in discretionary reductions. It also required action by the super committee to recommend $1.2 trillion in additional reductions over 10 years to be reported to Congress by November and enacted by Jan. 15, 2012 and authorized a trigger (known as “sequestration”) to obtain those reductions in 2013 if they could not reach agreements.
By November, the super committee could not reach agreements and disbanded leaving Congress with the responsibility of finding the $1.2 trillion in cuts required by the Budget Control Act before the 2013 sequestration kicks in.
In December, amid polarizing debates on Capitol Hill, a final two-month agreement was reached to extend a payroll tax break and the unemployment insurance fund.
Breaking Down the Sequester
The Budget Control Act (BCA) requiring a sequestration of funds designed to reach the total $2.1 trillion in reductions was enacted in August 2011. The first $900 billion in cuts were enacted during the passage of the BCA. The remaining $1.2 trillion must now be found or automatic sequester of funds is triggered to be evenly split by domestic discretionary and defense accounts.
The Congressional Budget Office (CBO) assumes that of the $1.2 trillion, $216 billion (18 percent) will be saved by reduced debt service costs, leaving $974 billion in cuts to be evenly split over nine years. In effect, this means a total cut of $492 billion or $54.7 billion per year from each side. This is approximately in the range of 8.5 percent to 10 percent in cuts per year to domestic and defense accounts.
Final Actions, Effects on Counties
Congress reduced regular discretionary spending by 4 percent between FY10 and FY12. It more than halved the amount of money provided for the Federal Emergency Management Agency’s equipment and training programs for state and local governments to $1.3 billion. Just as hard on counties was a cut of $1 billion, or 25 percent, over the two budget years for the Community Development Block Grant (CDBG) program, reducing it to $2.9 billion in FY12.
Meanwhile, the debt limit law (PL 112-25) also set limits on discretionary spending through FY21, capping it at $1.23 trillion in that final year. And many fiscal conservatives are pushing for deeper cuts in discretionary spending, arguing that the caps in the debt limit law represent only “ceilings,” or the maximum amount allowed to be allocated. Given the rising concern over the nation’s $15 trillion debt, it is likely that Congress will not abandon its cost-cutting strategy.
The debates in 2012 will continue with major discussions on whether to raise revenues and if so, on whom and on controlling spending, while assisting an aging population and providing needed services. NACo supports a balanced approach to tackling America’s debt.
NACo Position
NACo has adopted four key principles which it believes should guide discussions as options are being considered. They have been circulated to all relevant congressional committees, House and Senate leadership and the administration. They are:
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You cannot solve the budgetary deficit by only cutting domestic, non-military discretionary programs. It is well known that non-military, discretionary programs are only 12 percent, or approximately $480 billion, of the annual federal budget of $3.6 trillion.
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Federal assistance to state and local governments will help mitigate further layoffs. More than 500,000 jobs have been lost over the last three years in the government sector, which has helped exacerbate the unemployment picture and contributed to the private sector’s concerns and their lack of an increased investment strategy.
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Federal investment in state and local infrastructure produces private sector jobs; and
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Deficit reduction should not be accomplished by shifting costs to counties, imposing unfunded mandates, or preempting county programs or taxing authority. State and local governments, who must balance budgets annually, will need flexibility in dealing with unnecessary government regulations or mandates.
In discussing tax reform issues, NACo urges Congress to reject ideas that may limit local government’s ability to seek new revenues in order to meet the balanced budget requirements and provide for constituent needs.