FY 2023 Budget Request: Highlights for Counties

EXECUTIVE SUMMARY

The nation’s 3,069 counties play a key role in administering federal programs and services in our local communities. Counties build and maintain public infrastructure, transportation and economic development assets, provide criminal justice and public safety services, and protect the public’s health and well-being. Policies and programs established by the federal government help support and coordinate local efforts, and a strong partnership between all levels of government is critical to providing many of the programs and services on which America’s residents rely every day. This document includes summary charts highlighting proposed cuts, eliminations or increases to key federal programs in the president’s budget request for Fiscal Year (FY) 2023 that are relevant to county governments and a section-by-section summary of the budget outlining items of note for county governments.

Proposed Changes to Base Discretionary Funding in Biden's Budget

View Chart

Note: Comparison does not include mandatory spending, emergency funding or program integrity funding
Source: https://www.washingtonpost.com/politics/interactive/2021/biden-2022-budget-department-breakdown/

TOP TEN HIGHLIGHTS FOR COUNTIES

1. Significant increases in programs supporting housing and economic development including a new $35 billion Housing Supply Fund, the HOME Investment Partnerships Program and the Economic Development Administration.
    
2. A $5 billion investment over the next decade to help states and counties administer child welfare reforms under the Family First Prevention Services Act , including through increased reimbursement rates and more programmatic flexibility.
    
3. Doubles funding for Title I Grants to Local Educational Agencies, which target additional federal K-12 funding to high-poverty school districts.
    
4. Established a new $10 billion Election Innovation Grant Program, which would provide funding over the next decade for state and local election-related infrastructure.
    
5. Elimination of the State Criminal Alien Assistance Program, a federal program that is used to reimburse state and local governments for the cost of incarcerating undocumented immigrants, currently funded at $234 million.
    
6. Nearly $3.9 billion in increase investments for U.S. Forest Service wildland fire management activities
    
7. Increased investments for opioid prevention, treatment and recovery services.
    
8. Reform health coverage and makes major investments in the mental health workforce to address the mental health crisis.
    
9. Over $68 billion to modernize, repair and improve the safety and efficiency of the nation’s network of roads and bridges.
    
10. A $600 million investment to help deploy broadband infrastructure in rural communities.
     

OVERVIEW: THE PRESIDENT’S FY 2023 BUDGET REQUEST

Topline Numbers

On March 28, President Biden released the Fiscal Year (FY) 2023 budget request outlining the administration’s proposal for federal spending for the fiscal year beginning October 1, 2022. Federal spending in FY 2023 is not subject to statutory spending caps prescribed by a bipartisan budget agreement. The president’s budget requests a total of $5.8 trillion in both mandatory and discretionary federal spending in FY 2023, just shy of current, FY 2022 spending. Of this amount, $4.16 trillion would be in mandatory spending and $1.64 trillion would be in discretionary spending, a nearly 9 percent increase over the FY 2022 topline discretionary spending level. Defense spending would approximately receive a 4 percent spending increase for a total of $813 billion in discretionary spending, while nondefense spending would receive a nearly 14 percent increase for a total of $829 billion in FY 2023.

Under the budget, federal spending would increase by a total of $1.4 trillion over the next decade excluding proposed spending in the Build Back Better Act budget reconciliation bill that stalled in the U.S. Senate shortly after the U.S. House passed the bill in November 2021. While the budget does not specifically include any line item Build Back Better proposals it does include a “deficit neutral reserve fund” as a placeholder for budget items and revenue raisers that could result from the bill and the administration maintains that the budget reflects the key principles of Build Back Better. 

Deficit & Debt

Federal deficits are estimated to drop to approximately $1.4 trillion in FY 2022, an approximately $1.3 trillion reduction from the FY 2021 level. The president’s FY 2023 budget, which included deficit reduction as one of its top priorities, estimates about $1 trillion in savings over the next decade if these policies are enacted. This estimate could grow once the higher spending levels in the FY 2022 omnibus appropriations package, signed into law less than two weeks before the budget was published, are taken into account. Most of the budget’s deficit reduction proposals are based on several tax reforms and increases proposed in the budget that the administration estimates would net over $2.5 trillion in revenue over the next decade. This estimate would be on top of any agreed to tax increases included in the Build Back Better Act’s climate and social safety net bill that is being negotiated by Congress. 

However, this figure is built around the assumption that certain Build Back Better provisions are enacted into law and that tax cuts included in the Tax Cuts and Jobs Act (TCJA) would expire on schedule in 2025. Extending certain provisions of the TCJA to avoid tax hikes for middle-and lower-income households could cost between $1 trillion and $2 trillion, if not more.

Publicly held federal debt is estimated to grow by about $14.7 trillion over the next decade and according to the budget, the federal government will surpass the current $31.4 trillion debt limit before the end of the year. The president signed a $2.5 trillion debt limit increase into law in December 2021, and while Congress intended this most recent increase to last through November 2022, they will likely need to pass legislation to raise the debt ceiling soon after the beginning of FY 2023 on October 1, 2022.

MAJOR PROPOSALS OF SIGNIFICANCE TO COUNTIES

Agriculture and Rural Affairs

Strengthens the Food Supply Chain: The president’s budget request proposes additional investments in the Agricultural Marketing Service and other U.S. Department of Agriculture (USDA) programs to build a fair and resilient food supply chain. This proposal would build on the funding for supply chain assistance in the American Rescue Plan Act (ARPA), which aimed to address the vulnerabilities in our nation’s food system that were exacerbated by the pandemic and create new local market opportunities and jobs. The president’s budget also provides $1.2 billion for the Food Safety Inspection Service to increase producers’ capacity to respond to shifting market demands while ensuring healthy food products.

The ability of county governments to provide services financed by property and other local taxes is dependent on farm income and rural business. Agriculture is a key component of economic development and should be included in any comprehensive rural development program. Counties support investments in infrastructure, entrepreneurship programs and facilities that process, distribute, and develop value-added products using locally-grown commodities purchased from local farmers to meet the demand for local, healthy food.

Outlines 2023 Farm Bill Priorities: The president’s budget outlines the administration’s priorities as negotiations on the 2023 Farm Bill begin. Specifically, the budget request urges lawmakers to include provisions related to voluntary climate-smart agricultural and forestry practices, renewable energy opportunities for producers, with the administration's goal of ensuring the wealth created in rural America stays here and ensuring all Americans have access to healthy, affordable food.

Community, Economic and Workforce Development

New Housing Supply Fund: The president’s budget request includes increased funding towards several initiatives and programs that support key county priorities. The budget request would provide the U.S. Department of Housing and Urban Development (HUD) with the ability to expand access to housing vouchers, increase and preserve the supply of affordable housing, make critically needed repairs to public housing, and more.

Notably, the budget proposes $35 billion in mandatory spending for a new Housing Supply Fund that would provide resources directly to state and local housing finance agencies and their partners. Of that total, $25 billion of the program would go towards affordable housing production grants, revolving loan funds, and other streamlined financing tools, and $10 billion in grants to help advance state and local jurisdictions’ efforts to remove barriers to affordable housing development, including funding for housing related infrastructure.

The budget also proposes $1.95 billion in funding, a 30 percent increase over FY 2021 enacted levels for the HOME Investment Partnerships Program (HOME Program). The HOME program, authorized in 1990, has been an essential initiative in assisting county governments in providing affordable housing for low-income families.

Permanent Extension of New Markets Tax Credit: The president’s budget would make the New Markets Tax Credit (NMTC) permanent. NMTC is a program that encourages investment in low-income community businesses and allows individuals and corporations an up-to-39 percent credit for qualified equity investments (QEIs) in community development entities (CDEs) for up to seven years.

The New Market Tax Credit differs from other tax credit programs, such as the low-income housing tax credit, as the tax credit investor of an NMTC does not own an interest in the project and the costs associated with the project have no bearing on the amount of the credit.

By making the NMTC program permanent, this would allow CDEs to continue to make investments in low-income communities with greater certainty, ultimately providing a sense of stability in the community and generating greater economic opportunities in distressed communities. In addition, it would allow for a more consistent schedule for awards and applications so communities can rely on this funding on a more consistent and reliable basis.

Economic Development Administration: The president’s budget would fund the Economic Development Administration (EDA) at $433 million, a $103 million (or 31 percent) increase over FY 2022 levels. As outlined in the budget request, this injection of funding would help EDA provide additional grants that counties use for economic development and invest in essential infrastructure such as water and wastewater systems, middle mile broadband networks, workforce training centers, business incubators, intermodal facilities and science and research parks. EDA is the only federal agency with a mission solely focused on private sector job creation in distressed areas and is important to counties because it helps local communities achieve long-term economic growth based on local and regional priorities.

Environment, Energy and Land Use

Addresses Environmental Justice: The president’s budget request calls for significant investments to advance environmental justice in communities across the country, including those in rural areas, and provides funding to several federal agencies to meet the administration’s Justice40 goal. Under the Justice40 initiative, at least 40 percent of federal investments in climate and clean energy must benefit disadvantaged communities.

The budget would provide $1.5 billion to the U.S. Environmental Protection Agency (EPA) for environmental justice activities across different programs, including $100 million for a new community air quality monitoring and notification program.

The budget would also provide significant funding to the U.S. Department of Energy (DOE) for environmental justice efforts. This funding would include a new Low Income Home Energy Assistance Advantage pilot program to retrofit low-income homes with energy efficient appliances, as well as $31 million for a new Equitable Clean Energy Transition program to help energy and environmental justice communities benefit from the transition to a clean energy economy. 

Addresses Per- and Polyfluoroalkyl Substances (PFAS): The president’s budget would provide $126 million to the EPA to address PFAS, $57 million above the FY 2021 enacted level. The funding would be used to further study the health and environmental impacts of PFAS; restrict the use of PFAS to prevent pollution; and remediate PFAS that is already present in the environment.

Finance, Pensions and Intergovernmental Affairs

Protecting U.S. Elections: The president’s budget requests $250 million in FY 2023 to establish a new Election Innovation Grant program through the U.S. Election Assistance Commission (EAC) to competitively award funding to states and eligible local governments for projects with significant national, regional, or local impact in the improvement of election administration. Specifically, funding would be used to support innovation in the areas of voting technology, cybersecurity, general security safeguards, election accessibility, language proficiency, voter education, and usability.

The budget also proposes legislation to support critical state and local election infrastructure by providing $10 billion over 10 years in new mandatory formula grants. These funds would enable election-related capital investments that support upgrades to registration databases, voting systems, and physical structures; recruitment, training and retention of election workers; improvements physical and cyber security; and voters’ access to reliable elections. 

Additionally, the budget proposes $5 billion over 10 years to expand U.S. Postal Service (USPS) delivery capacity to support vote-by-mail through making ballots postage-free and reducing the cost of other election-related mail for jurisdictions and voters.

Counties support a consistent, predictable and dedicated federal funding stream to assist counties with meeting the significant federal requirements already imposed on local governments administering elections. Federal funding dedicated to election administration should be administered in coordination and in consultation with local governments, including an assurance that a portion of the funding be made available to the discretion of local governments.

U.S. Census Bureau: The president’s budget proposes $1.5 billion in FY 2023 for the U.S. Census Bureau, a nearly 10 percent increase over the enacted FY 2022 funding level. This request includes investments to finalize and evaluate the 2020 Decennial Census, begin preparing for the 2030 Census, and to support the American Community Survey (ACS) and the Economic Census.

Tax Reforms: The president’s budget proposes several tax reforms that include: raising the corporate tax rate to 28 percent; eliminating fossil fuel tax preferences; increasing the top marginal tax rate to 39.9 percent for taxable income over $400,000 for single filers (or $450,000 for married individuals filing jointly); and raising the capital gains tax from 20 percent to 37 percent. Versions of these tax reforms have previously been proposed by the administration in the Build Back Better Plan, but ultimately were not included in the Build Back Better Act (BBBA) of 2021 that passed the U.S. House of Representatives in November 2021 and continue to be negotiated by Congress. Other tax proposals included in the FY 2023 budget request include establishing a 20 percent minimum tax on households worth more than $100 million in regular income and changes in value of unsold assets and bringing cryptocurrency and other digital assets under existing tax regulations.

Health

Enhancing Pandemic Preparedness: The president’s budget request would invest $81.7 billion over five-years to support robust interagency preparedness and response efforts against future pandemics in the wake of COVID-19.

Mental Health Workforce and Parity Enforcement: The president’s budget request calls for new investments in the number of mental health providers serving Medicaid beneficiaries, and behavioral health workforce development and service expansion, including in primary care clinics and at non-traditional sites. The budget request also would provide $275 million over 10 years to enhance state enforcement of mental health parity laws that require behavioral health benefits and medical benefits to be aligned.

Support for Gender-based Violence Initiatives: The president’s budget would provide $1 billion to support Violence Against Women Act of 1994 (VAWA) programs, a $487 million or 95-percent increase over the FY 2021 enacted level.

Proposed Decrease in Medicaid Spending: The president’s budget would provide $536 billion in federal spending on the Medicaid program in FY 2023, a decrease of $26 billion from the FY 2022 enacted level. This decrease in funding reflects a projection that enrollment in Medicaid will decline at the end of the federal public health emergency this year.

Human Services and Education

Build Back Better Proposals: The president’s budget reaffirms the administration’s support for a broad variety of proposals included in the Build Back Better Act (BBBA) of 2021, including investments in affordable child care and universal preschool, tuition-free community college, an expanded child tax credit and more. However, the budget does not include specific spending estimates associated with these proposals, citing ongoing negotiations with Congress.

Read NACo’s analysis of BBBA and how it would impact counties here.

Proposed Investments in Public Education: The president’s budget request would more than double funding for Title I Grants to Local Educational Agencies, which target additional federal K-12 funding to high-poverty school districts. The increase would represent a major structural shift in the program by including $16 billion in mandatory funds, making those additional resources permanent. The budget request also calls for a more than $400 million increase in funding for Full-Service Community Schools, grants that support the planning, implementation, and operation of community-level partnerships to provide wrap-around services to low-income students and their families. To strengthen low-income students’ access to post-secondary education, the proposal also calls for a doubling of the maximum Pell Grant Award to $13,790 by 2029, beginning with an FY 2023 increase of $2,157 per student.

Proposed Policy Changes in Child Welfare: As of October 1, 2021, states and counties have been tasked with implementing significant changes to the child welfare system authorized under the Family First Prevention Services Act (FFPSA) of 2018. These changes are intended to reduce the use of congregate settings for children in the foster care system while incentivizing increased investment in prevention services that keep child abuse and neglect from occurring. The president’s budget proposes several policy changes to address current challenges in FFPSA implementation, including increased federal reimbursement rates and more flexibility within prevention services, representing an investment of $4.9 billion over 10 years.

However, the budget request also includes a harmful proposal to reduce the reimbursement rate for Qualified Residential Treatment Programs (QRTPs), even though these are one of the few residential settings designated as eligible for federal reimbursement under FFPSA. QRTPs are designed to provide safe, therapeutic, effective interventions to help children heal from trauma in congregate settings. They must serve children independently assessed to have serious emotional or behavioral disorders or disturbances and meet rigorous qualifications around licensing, length of stay, and treatment. Though the president’s budget purports to counteract the proposed reduction by proposing an increased reimbursement rate for foster care and kinship placements, these provisions would exacerbate an ongoing placement crisis for children with high acuity needs in the child welfare system. Counties already face significant challenges finding appropriate settings for youth with assessed behavioral and mental health needs; reduced funding for QRTPs would cause even more providers to leave the system and lead even more children overstaying medical necessity in higher levels of care, boarding in emergency rooms and sleeping in child welfare offices and hotels because the appropriate interventions are not available. 

Justice and Public Safety

Supporting Local Resilience: The president's budget request calls for continued investment in key hazard mitigation and resilience programs from the Federal Emergency Management Agency (FEMA). The budget would provide over $3 billion to be dispersed among FEMA programs such as the flood hazard mapping program and Building Resilient Infrastructure in Communities (BRIC) program, amongst others. This funding would allow counties to continue mitigation activities that reduce risk and disaster costs and increase the resilience of critical infrastructure.

Enhancing Investments in Criminal Justice System: The president’s budget request seeks to strengthen the criminal justice system through increased investment in state and local law enforcement programs, juvenile justice and community violence prevention and intervention. The budget would provide $3.2 billion for grants through the U.S. Department of Justice (DOJ) for programs such as the Byrne-Justice Assistance and Community Oriented Policing Services (COPS) programs. It would also provide an increase of over $400 million in juvenile justice programs to expand access to diversionary juvenile justice initiatives.

Urban Area Security Initiative: The president's budget would cut funding for the Urban Area Security Initiative (UASI) by over $80 million. UASI assists high-threat, high-density urban areas in efforts to build and sustain the capabilities necessary to prevent, mitigate, respond to and recover from acts of terrorism. In FY 2020, there were 32 high-risk urban areas that received funding from the program.

Public Lands

Increased Investment in Landscape Health and Fire Prevention: The president’s budget request seeks $3.88 billion in funding for wildland fire management at the U.S. Department of the Interior and the U.S. Forest Service. This includes $625 million directed to forest health treatments and hazardous fuels reductions, so federal agencies can team with state, county and tribal partners to treat forestlands most at risk of wildfire. The budget also calls for $2.1 billion in additional funding for the Wildfire Operations Reserve Fund.

Level Funding for Payments In-Lieu of Taxes (PILT): The president’s budget request seeks $535 million in funding for PILT, the same amount as the FY 2021 enacted level. Previous budget requests have typically called for reduced PILT funding.

Telecommunications and Technology

Additional Funding for Rural Broadband Deployment: Building on the momentum of the Bipartisan Infrastructure Law, the president’s budget would provide $600 million for the USDA’s ReConnect Program to help provide grants and loans to deploy broadband to unserved areas, including rural areas. The budget would also provide $25 million to help rural telecommunications cooperatives refinance their Rural Utilities Service debt and upgrade their broadband facilities.

Transportation

Continued Focus on the Expansion of Public Transit: The president’s budget request continues to call for additional resources for public transit systems. Compared to regular funding (excluding advance appropriations from the Bipartisan Infrastructure Law (BIL) for public transit in FY 2022, the president’s FY 2023 request is 26.6 percent higher than FY 2022 enacted levels.

Decreases Airport Improvement Program: The president’s budget request zeroes out discretionary funding for the discretionary Airport Improvement Program (AIP) for FY 2023. However, this decrease is dramatically offset by funding made available for airport capital infrastructure projects through the BIL and the Federal Aviation Administration Reauthorization Act of 2018. For example, assuming the proposed decrease in the budget request, AIP and the new BIL Airport Infrastructure Grant Program that mimics AIP would combine for a total of $6.35 billion in FY 2023, a nearly 70 percent increase from FY 2021, which reflects the last fiscal year before the BIL was enacted.