National Association of Counties
Washington, D.C.

 New budget deal heads to Senate for final OK

By Marilina Sanz and Jessica Monahan


The House by a 332–94 vote Dec. 12 has approved a two-year budget agreement reached earlier last week by Budget Conference Committee chairs, Sen. Patty Murray (D-Wash.) and Rep. Paul Ryan (R-Wis.). It next heads to the Senate where it is expected to pass.

The Budget Conference Committee proposal, titled the Bipartisan Budget Act of 2013, provides $63 billion in sequester relief over two years ($45 billion in FY14 and $18 billion in FY15). It 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 FY14 and $492.4 billion in FY15. The agreement also includes $85 billion in savings and revenue that will fully offset the sequester relief and reduce the deficit by roughly $22 billion.

The budget agreement would affect counties in several ways.

By smoothing out an impending dip in federal discretionary spending, it 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 and justice and public safety programs.

The bill also has a Senate 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.  

Bullet Click here for a summary of the Bipartisan Budget Act of 2013

These provisions are designed to make it easier for states and counties with Medicaid and child support responsibilities to recover program costs.

The tax exemption for municipal bond interest and the federal deduction for state and local taxes remain intact for now. At one point, some thought that an overhaul of the federal tax code could be included in the budget deal. In recent weeks, however, it became 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 affect those who issued Build America Bonds (BAB). Since the agreement only deals with discretionary spending but leaves the cuts to mandatory spending in place, the reduction in the subsidy payment for BAB issuers that began earlier this year remains unchanged. 

Furthermore, the budget deal extends the cuts to mandatory spending for two years which, absent any future change, also extends the reduction in the subsidy payments to BAB issuers into 2022 and 2023 as well.

The bill provides more certainty by restoring regular order to the budget process. If both chambers are successful, the appropriations committees will be able to work on FY14 spending bills in advance of the Jan. 15, 2014 deadline — the date the current Continuing Resolution expires.

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

  • expanding the use of the Treasury Offset Program to all states so they can recover certain unemployment-insurance debts
  • 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 Trans-boundary 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 Dec. 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 1 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 nonprofit 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 FY23
  • 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 Justice Department’s Assets Forfeiture Fund and the Treasury Department’s Forfeiture Fund and
  • 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.