The Budget Control Act of 2011: Knowns and Unknowns

NASBO Annual MeetingSt. George, UTAugust 9, 2011

Federal Funds Information for States

Overview: BCA of 2011

Three components with potential to affect future funding for state grant programs:Discretionary spending caps w/adjustmentsJoint Select Committee on Deficit ReductionSequestration process

Other components of interest:Debt limit, program integrity, higher education programs, balanced budget amendment.

Discretionary Spending Caps

FY 2010 FY 2011 President House Agreement FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021Security** $683 $689 $719 NA $684 $686 NS NS NS NS NS NS NS NSNon-Security $402 $361 $397 NA $359 $361 NS NS NS NS NS NS NS NS Total $1,084 $1,050 $1,116 $1,019 $1,043 $1,047 $1,066 $1,086 $1,107 $1,131 $1,156 $1,182 $1,208 $1,234

Dollar change from previous year -$34 $66 -$31 -$7 $4 $19 $20 $21 $24 $25 $26 $26 $26Percent change from previous year -3.2% 6.3% -2.9% -0.7% 0.4% 1.8% 1.9% 1.9% 2.2% 2.2% 2.2% 2.2% 2.2%

*Figures exclude funding for overseas contingency operations

Sources: FY 2012 budget for FY 2010 and FY 2012 President; House Budget Committee website for House FY 2012; NGA for FY 2011

FY 2012

Discretionary Spending Limits Under Budget Control Act of 2011*($ in billions)

**Security spending consists of spending from within the departments of Defense, Homeland Security, VA, National Nuclear Security Administration, intelligence community management, and budget function 150 (international affairs).

Joint Select Committee on Deficit Reduction

12 members: 3 from each chamber, party Identify 10-year deficit reduction of at least $1.2

trillion through any means. November 23, 2011 deadline for recommendations,

December 23 for congressional vote. Approval would permit dollar-for-dollar increase in

debt limit, up to $1.5 trillion.

Sequestration

Automatic ATB cuts if joint committee process fails to produce at least $1.2 trillion in deficit reduction.

• Split evenly between defense, nondefense.• Includes mandatory spending with several exceptions.• Effective in January 2013 for FY 2013 and beyond.• Medicare cuts capped at 2%.• Different application of ATB cuts in FY 2013 versus future

years.

Increases in the Federal Debt Limit

President can request $900 billion now, of which $400 billion is immediately available and remainder becomes available absent a joint resolution of disapproval.

With adoption of $1.5 trillion in deficit reduction or a balanced budget amendment, president can request an additional $1.5 trillion.

Absent those benchmarks, president can request $1.2 trillion, also subject to disapproval.

Program Integrity

Spending for program integrity efforts in Social Security, health care are outside discretionary caps.

Goal is to reduce net federal spending by targeting overpayments for benefits.

Applies to SSA for SSI, DI and to HCFRA for Medicare, Medicaid, CHIP.

Changes to Education Program

• Increases funding for Pell Grants.• Eliminates subsidized loan program for

graduate students.• Eliminates loan repayment incentives.

Balanced Budget Amendment

• After September 30, 2011, and before December 31, 2011, House and Senate required to vote on joint resolution proposing a balanced budget amendment.

• Adoption would allow increase in debt limit to $1.5 trillion.

Impact on States

FY 2012 looks relatively benign from a technical/budget perspective, but politics can be tricky.

FY 2013+ hinges on joint committee– If it succeeds, what will it recommend?– If it fails, how will ATB cuts be applied to

individual programs?

The End

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