Reports & Toolkits

Legislative Analysis for Counties: The Consolidated Appropriations Act of 2023

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    Legislative Analysis for Counties: The Consolidated Appropriations Act of 2023

    On December 23, 2022, the U.S. Congress enacted a Fiscal Year (FY) 2023 omnibus appropriations bill to fund the federal government through September 30, 2023. Enactment of the omnibus followed a series of Continuing Resolutions (CR) to fund the federal government and avert a government shutdown since the beginning of the federal fiscal year on October 1, 2022. President Biden signed the $1.7 trillion omnibus appropriations bill into law on December 29, 2022.

    For the second year in a row, discretionary spending levels for FY 2023 were not limited by statutory spending caps prescribed by the Budget Control Act of 2011. As such, the White House, congressional leadership, and top appropriators negotiated topline spending levels over several months.

    The FY 2023 omnibus includes several key investments of importance to counties detailed in this report. These include, but are not limited to, full funding for the Payments in Lieu of Taxes (PILT) program and significantly invests in the RECOMPETE pilot program and technology hubs authorized by the bipartisan CHIPS and Science Act. These programs and others funded by the bill, including a $550 million increase in wildland fire suppression, will enable counties to provide critical services and plan for economic sustainability and growth in 2023.

    The final omnibus represents a total of $1.7 trillion in discretionary spending across all 12 spending bills. Of this total amount, $773 billion is in non-defense discretionary spending, an increase of 5.9 percent over the comparable FY 2022 level, and $858 billion is in defense discretionary spending, an increase of 9.7 percent.

    In addition to regular programmatic funding and extensions, the FY 2023 omnibus included nearly $10 billion in earmarks (rebranded as community project funding and congressionally directed spending), representing 4,000 projects, for the first time in nearly a decade, although with increased transparency and guardrails. As a result, hundreds of county programs and critical infrastructure projects aimed to better serve communities will receive direct federal investments.   

    The omnibus bill delivers on many county priorities which are detailed below. Notably. during consideration of the final omnibus agreement, the U.S. Senate adopted an amendment to the package offered by Sens. John Cornyn (R-Texas) and Alex Padilla (D-Calif.) the bipartisan State, Local, Tribal and Territorial Fiscal Recovery, Infrastructure and Disaster Relief Flexibility Act. This amendment grants additional flexibility to county governments in investing resources from the American Rescue Plan’s (ARPA) Coronavirus State and Local Fiscal Recovery Fund, including infrastructure, community development, and disaster response. It will also provide the U.S. Treasury with much-needed resources to assist counties in deploying Recovery Funds.

    This analysis includes funding highlights for key programs impacting counties.

    FY 2023 Discretionary Funding By Spending Bill

    View Chart

    COUNTY PRIORITIES INCLUDED IN FY 2023 OMNIBUS

    • One year of full, mandatory funding for Payments in Lieu of Taxes (PILT) for federal public lands counties
    • Funding for direct county investments authorized by the bipartisan CHIPS and Science Act, including $500 million for technology hubs and $200 million for the RECOMPETE pilot
    • Reforms to the Medicaid Inmate Exclusion Policy, providing access to Medicaid and Children’s Health Insurance Program benefits for juveniles awaiting trial, for which NACo aggressively advocated
    • County mental health priorities, such as funding for the 988 crisis line and reauthorization of the Community Mental Health Services Block Grant program
    • Permanent extension of the American Rescue Plan Act’s state option to provide 12 months of continuous Medicaid coverage for post-partum care
    • $75 million for Election Security Grants to improve the administration of federal elections, enhance election technology and make security improvements as authorized by Help America Vote Act (HAVA)
    • Additional funding for the Clean Water State Revolving Fund and Drinking Water State Revolving Fund
    • One-year reauthorization of the federal Temporary Assistance for Needy Families (TANF) program
    • A $100 million increase in funding for the U.S. Department of Agriculture's (USDA) Rural Development programs, with funding now totaling $4 billion
    • Funds the U.S. Department of Transportation (USDOT) at the highest level in history, including additional funds for direct, county-eligible RAISE grants

    Emergency Spending

    Assistance to Ukraine

    The FY 2023 omnibus spending deal includes $47.3 billion of emergency funding to provide humanitarian, military, and economic assistance to Ukraine.

    Other Provisions

    State and Local Tax (SALT) Deduction

    Counties have supported a full restoration of the SALT deduction since the establishment of the cap as part of the Tax Cuts and Jobs Act of 2017 (P.L. 115-97). The SALT deduction allows taxpayers to deduct state and local taxes paid from their federally taxable income, protecting individuals and families from double taxation and local governments’ decision-making authority. Capping the deduction has limited state and local control of tax systems and shifted the intergovernmental balance of taxation. By fully or partially restoring the SALT deduction counties’ ability to deliver essential public services, such as emergency response, infrastructure development and public health services would be improved. Efforts to restore the SALT deduction have continued in the 117th Congress, including through the stalled Build Back Better reconciliation bill and standalone legislation.

    H.R. 5735 ARPA Recovery Fund Flexibility

    The State, Local, Tribal, and Territorial Fiscal Recovery, Infrastructure and Disaster Relief Flexibility Act provides additional flexibility for the $350 billion Coronavirus State and Local Fiscal Recovery Fund (Recovery Fund) authorized by the American Rescue Plan Act (ARPA). Specifically, if enacted, the bill would collectively allow counties nationwide to utilize the Recovery Fund for roughly $27 billion in new transportation and infrastructure projects and unlocks unobligated administrative funds for the U.S. Department of the Treasury to continue administering the Recovery Fund. The Recovery Fund, which NACo helped develop and strongly advocated for its passage, is a historic investment in our nation’s counties. These funds provide direct, flexible aid to every county, parish and borough in America. The legislation strengthens the Recovery Fund by providing counties with the flexibility to invest funds in transportation, infrastructure and other vital public services and allows counties to continue working with our intergovernmental partners to successfully implement this historic investment in our communities.

    ARPA PAYGO Waiver for 2023-2024

    Counties support the use of direct subsidy bonds (e.g. Build America Bonds and Recovery Zone Bonds) as additional financing options for county governments to implement critical infrastructure in our communities. As opposed to tax-exempt municipal bonds, interest on direct subsidy bonds are generally subject to tax however issuers instead receive subsidy payments from the federal government. While these payments were not initially subject to sequestration cuts, the Budget Control Act of 2011 triggered a schedule of cuts to these payments through 2031. Further, a failure to waive the statutory Pay-as-You-Go (PAYGO) requirements as they related to the budgetary impacts of the American Rescue Plan Act (ARPA) would have resulted in further cuts to subsidy payments from the federal government owed to issuers.

    SECURE 2.0 Retirement Provisions

    NACo believes that all counties should provide all county employees with adequate pension and retirement benefits that are governed by county elected officials and that are exempt from tax and regulatory burdens. NACo supports the continuation of deferred compensation (457) plans for county employees. County employees should be able to utilize these plans to adequately provide for their own retirements. NACo supports full portability of retirement benefits between all types of retirement plans and opposes any policy that would eliminate or limit the special features of state and local governmental retirement plans. Counties support pension and retirement reforms that would increase IRA limits and catch-up contributions to public sector plans, continue employer-sponsored 457 deferred compensation plans for county employees and increase benefit and contribution limits, and simplify rollover procedures between all types of plans.

     

    This analysis includes funding highlights for key programs impacting counties.
    2023-01-17
    Reports & Toolkits
    2023-04-11
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