Capitol to Capitol
An Information Service of NCSL's Standing Committees

Volume 19   Issue 19 - June 15, 2012

 

SEQUESTRATION MANIPULATION

Less than six months remain until more than $100 billion in across-the-board FY 2013 cuts will be mandated. Meanwhile, lawmakers continue debating whether sequestration should be eliminated, modified or replaced. The main target is finding an alternative to the $492 billion in savings in defense and war funding. There are concerns these cuts could affect military preparedness. Army General Martin Dempsey, chairman of the Joint Chiefs of Staff, told a hearing of the Senate Appropriations Defense Committee that sequestration would “increase the likelihood of conflict.” In a move to help alleviate cuts to the Pentagon, Michigan Senator Carl Levin, chairman of the Armed Services Committee, advocated for a comprehensive deal to repeal the sequestration trigger implemented last August in the Budget Control Act. Levin argued discretionary spending, including defense and areas involving state-federal grant programs, should not bear the full burden of sequestration and instead be cut by $200 billion. The remainder of savings would be achieved by raising new revenue, changing entitlement programs and shaving interest payments over the next nine years. As for the impending fiscal cliff at end of 2012, Michigan Representative and House Ways and Means Chairman Dave Camp floated the notion of extending many of the tax provisions, including the 2001/2003/2010 tax cuts for a full year. There was no discussion of whether these extensions would be offset. Lurking in the background of these discussions is the release of the Congressional Budget Office’s (CBO) most recent long-term budget outlook. The report highlights the unsustainable fiscal path of the nation’s debt. The extension of tax provisions that expire at the end of 2012, along with preventing the automatic spending cuts, would increase the current federal debt ratio from its current standing of 73 percent of GDP to nearly 200 percent of GDP by 2037. Before the House Budget Committee last week, CBO Director Douglas Elmendorf stated a familiar theme: “It isn’t possible both to keep taxes at their historical averages as a share of GDP and keep the laws unchanged for Social Security, Medicare and Medicaid.” The full report can be viewed at http://www.cbo.gov/sites/default/files/cbofiles/attachments/06-05-Long-Term_Budget_Outlook.pdf. NCSL staff contacts: Michael Bird, Jeff Hurley


COURT: PAY ME NOW, NOT LATER

On June 4, 2012, the U.S. Supreme Court sided with states and localities in a 6-3 decision in Armour et al v. City of Indianapolis, Indiana et al. The court held Indianapolis did not violate the equal protection clause of the U.S. Constitution when it forgave the debt of those choosing to pay in installments for the city’s sewer upgrades but refused to issue refunds to those making earlier, lump sum payments, for the same upgrades. The court said the city’s decision to shift away from installment payments for current and future upgrades to save administrative costs was rational and did not involve a fundamental right. NCSL joined other state and local government organizations in an amicus brief supporting Indianapolis’ arguments. The full opinion is available at http://www.supremecourt.gov/opinions/11pdf/11-161.pdf. The amicus brief is available at http://www.statelocallc.org/storage/pdf/Armour%20final%25as%20filed.pdfNCSL staff contact: Susan Parnas Frederick. State and Local Legal Center contact: Lisa Soronen


STUDENT LOAN IMPASSE HOLDS

For two months Congress has displayed bipartisan willingness to avert a July 1, 2012, automatic increase in student loan interest rates from 3.4 percent to 6.8 percent. Keeping the interest rate at 3.4 percent costs $6 billion per year. Finding consensus on what $6 billion offset is agreeable to all remains elusive. At last count, leadership in both chambers had identified a smorgasbord of $50 billion in possible “pay-fors.” They range from placing further restrictions on Medicaid provider taxes that states impose to raising insurance premiums for underfunded private sector retirement plans. Some of the offset suggestions have been lifted from surface transportation reauthorization negotiations and others from federal deficit reduction plans. No quick resolution is in sight as of this writing. Stay tuned. NCSL staff contacts: Lee Posey, Michael Reed


APPROPRIATIONS UPDATE

The bottom line remains unchanged: States will not get any FY 2013 federal appropriations certainty until after November’s elections. Congress is making progress, however, in preparation for late-year decision-making. The House was active last week before leaving for a one-week recess, passing a number of spending bills both at the subcommittee and floor levels. The Agriculture, Financial Services and Transportation-Housing and Urban Development appropriations bills all passed within their subcommittees, leaving only two of the 12 bills yet to be addressed. Meanwhile, the Energy-Water, Homeland Security and Legislative Budget spending measures were passed on the House floor. The funding allocations for each of these bills abide by the House budget resolution (H. Con. Res. 112), which sets the overall discretionary spending limit at $19 billion less than Budget Control Act caps. Included in these various appropriations bills are slight increases from FY 2012 levels for child nutrition programs and state and local law enforcement while eliminating funding for high-speed rail. While appropriators did approve both the Financial Services and Labor-Health and Human Services-Education spending measures, the full Senate has yet to take up any FY 2013 appropriations bills. NCSL staff contacts: Michael Bird, Jeff Hurley (appropriations generally), Ben Husch, Jennifer Arguinzoni (transportation), Sheri Steisel, Emily Wengrovius (human services), Jennifer Arguinzoni (homeland security)


SENATE STYMIES BLOCK GRANT

The U.S. Senate’s efforts on a comprehensive 2012 farm bill (S. 3240) remains a work in progress. Negotiations over a possible cap on the number and relevance of amendments to be offered continue to drag on. This week, the Senate resoundingly rejected an amendment that would eliminate the Supplemental Nutrition Assistance Program (SNAP) and replace it with a block grant replete with cost shifts to states. The Senate rejected the block grant amendment 33-65 and continued to keep the underlying legislation nearly free of other cost shifts and potential unfunded mandates. There is still a long way to go on this, but Michigan Senator Debbie Stabenow and Kansas Senator Pat Roberts continue to seek bipartisan accord. NCSL staff contacts: Sheri Steisel, Emily Wengrovius (SNAP), Ben Husch, Marcus Peterson (agriculture)


AND THAT BRING US TO SURFACE TRANSPORTATION

As long as we are immersed in issues still unresolved, an update on negotiations over a “longer-term” surface transportation reauthorization is in order. State-federal highway, highway safety and mass transit program authority expires June 30, 2012 and that is driving the ongoing negotiations. Driving the same vehicle, however, are disagreements over funding levels, offsets, the Keystone XL pipeline, environmental reviews and transportation enhancement programs. There’s been plenty of “give” among conferees, but very little “take. Another extension – the 10th since the expiration of the last long-term authorization – seems imminent. The next extension is likely to be for six months, putting it right into the middle of the “fiscal cliff” debate at year’s end. NCSL staff contacts: Ben Husch, Jennifer Arguinzoni


TRANSACTIONS WITH BENEFITS

State legislators are concerned about the regulation process used by the Office of Family Assistance (OFA) relating to the inappropriate use of Temporary Assistance for Needy Families (TANF) benefits. That is the crux of a letter NCSL submitted June 11 to the OFA. The Middle Class Tax Relief and Job Creation Act of 2012 included a mandate requiring states to maintain policies that would prevent TANF assistance provided through Electronic Benefit Transfer (EBT) transactions from taking place in liquor stores, casinos/gaming establishments or adult entertainment venues. Signed by South Dakota Senator Tom Hansen and Kansas Representative Barbara Ballard, co-chairs of NCSL’s Human Services and Welfare Committee, NCSL encourages “OFA to make the regulation flexible enough to encompass current state policies, where they exist” and “to not go beyond the scope of what is outlined in the law.” The full letter is available at http://www.ncsl.org/default.aspx?tabid=24846. NCSL staff contacts: Sheri Steisel, Emily Wengrovius


GETTING CLOSE TO REAUTHORIZATION

Negotiators on differing versions of legislation reauthorizing drug user fees and modifying operations of Food and Drug Administration (FDA)-related drug, device and biological product provisions are aiming for closure by July 4. Both S.3187 and H.R. 5651 reauthorize medical device and pharmaceutical fees, including generic drugs. S. 3187 establishes a new pharmaceutical distribution supply chain safety program—stating that it does not preempt state law or regulation and specifying it does not trigger preemption of California law on the application of pedigrees to dangerous drugs. Both bills call for Government Accountability Office (GAO) reports on drug shortage topics, and the Senate goes a step further, seeking a GAO examination of problems associated with online pharmacy operations and how they may violate state or federal laws. The Senate bill would also allow the U.S. Department of Health and Human Services (HHS) to develop prescription drug monitoring program standards to expedite exchange of information among states receiving certain federal grants. Unlike the surface transportation negotiations, consensus could emerge soon. NCSL staff contacts: Joy Johnson Wilson, Rachel Morgan