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State-Federal Relations

Agriculture, Environment & Energy Committee

Agriculture, Environment & Energy Committee
Information Alert: President’s FY 2009 Budget Request Overview

On Monday, February 4, 2008, President Bush released his budget proposals for Federal Fiscal Year 2009.  This begins the federal process for determining the funding level for programs beginning October 1, 2008.  The following document and attached budget chart examine the funding levels that the President has proposed for key energy, environment and agriculture programs for 2009.

The next major step in the process is the passage of a congressional budget resolution.  The budget resolution is considered by the House and the Senate and does not require the President’s signature.  It lays out Congress’s position on program funding levels for fiscal year 2009.  Under regular order, the Appropriations Subcommittees then make their decisions based on their budget allocations from the budget resolution.  Following that, the appropriations bills for Energy & Water, Interior & Environment, and Agriculture move to full committee and then to the floor.  In other words, the release of the President’s Budget is only the beginning of a long and often contentious process. 

Environmental Protection Agency (EPA)
The overall request for the Agency is $7.14 billion for FY 2009 and the total request for State and Tribal Assistance Grants (STAG) is $2.622 billion.  This budget request would be the smallest funding level for EPA overall since 1997, and the funding level for the state portion of the budget would be the smallest since 1998.  While the unmet need for water infrastructure grows, the President is once again proposing a cut to the Clean Water State Revolving fund.  The President’s request is being made in context of his commitment to provide a total of $6.8 billion between 2004-2011, resulting in an annual average of $3.4 billion in loans for water infrastructure, which given the “over funding” in previous years by Congress results in a reduced request for FY 2009.  In addition, the budget once again includes a legislative proposal to remove the State volume cap on private activity bonds (PABs) issued for public purpose drinking water and wastewater facilities if the entity using the PAB implements full-cost pricing within five years.  There appears to be no consensus on the benefits of this proposal and it is unlikely to garner Congressional action this year.

History of US EPA and STAG Budgets, 1997-2009

	Total EPA Budget (1)	STAG (2)	Non-STAG portion of EPA's budget	Non-STAG Increase	State increase	% of EPA's budget to states
	$ billions	$billions	$billions	$billions	$billions
FY 2009 Proposed	7.143	2.622	4.521	-0.014	-0.304	36.7%
FY 2008	7.461	2.926	4.535	0.023	-0.287	39.2%
FY 2007	7.725	3.213	4.512	0.015	0.072	41.6%
FY 2006	7.638	3.141	4.497	0.080	-0.442	41.1%
FY 2005	8.000	3.583	4.417	-0.048	-0.322	44.8%
FY 2004	8.370	3.905	4.465	0.069	0.221	46.7%
FY 2003	8.080	3.684	4.396	-0.341	0.331	45.6%
FY 2002	8.090	3.353	4.737	0.453	-0.195	41.4%
FY 2001	7.832	3.548	4.284	-0.087	0.356	45.3%
FY 2000	7.563	3.192	4.371	-0.475	0.447	42.2%
FY 1999	7.590	2.745	4.845	0.081	0.148	36.2%
FY 1998	7.361	2.597	4.764	0.684	-0.122	35.3%
FY 1997	6.799	2.719	4.080	0.130	0.146	40.0%

Notes: Historical data from EPA's web page:  http://www.epa.gov/history/org/resources/budget.htm and from tables from the "Budget for Fiscal Year 2008, Historical Tables" do not match. Historical data may change due to application of rescissions after the publication of data.2008 data includes 1.56% rescission.

U.S. Department of Energy (DOE)
Weatherization Assistance Grants
The President’s budget request includes significant changes to the Weatherization and Intergovernmental Activities Program.  Most notably, the Department is requesting no funding for Weatherization Assistance grants.  The budget documents prepared by the Office of Energy Efficiency and Renewable Energy (EERE), which administers the program, asserts that the program has provided positive limited benefits to select recipients but has failed to catalyze broader solutions.  Additional budget documents categorize the termination of the program as a necessary move to aid EERE in returning to its core activities.  The Department does however note that “States can continue to support weatherization assistance activities with resources provided by the Low-Income Home Energy Assistance Program at the Department of Health and Human Services.”

Intergovernmental activites
The President’s FY 2009 Budget request calls for an overall funding of the State Energy Program Grants of $50 million to be split evenly between the base grant and competitive grants.  Funding in FY 2008 for the base grant was $34 million and $10 million for the competitive grants.  In addition, the President proposes funding for Tribal Energy Activities of $1 million, which is a $4.9 million cut from FY 2008 the Appropriations level.  The Department is also seeking to eliminate the Renewable Energy Production Incentives, which provide through FY 2008 incentive payments to publicly owned utilities, not-for-profit electric cooperatives, and Tribal governments and native corporations that own and operate qualifying facilities generating renewable energy.  The budget documents provide two explanations for this recommendation: 1) the value of the program has diminished over time as renewable energy technologies have become competitive, and 2) the number of eligible applicants has steadily grown, which couple with limited funding has resulted in increasingly smaller amounts being paid out.  Finally, the Administration has moved funding for the Asia Pacific Partnership into this section of the budget requesting $7.5 million for the program which has not been funded in either the FY 2007 or FY 2008 appropriations.

U.S. Department of Health and Human Services (HHS)
LIHEAP   (Low Income Home Energy Assistance Program)
Under the President’s budget proposal, this program takes a real hit.  The Administration is recommending a cut in the LIHEAP block grant ($280 million), the contingency fund ($40 million), and reflecting the emergency spending in the FY 08 Omnibus (zeroing out this $250 million) for a total reduction of $570 million.  The budget document seeks to downplay the impact of the reduction by noting that states also spend money on heating and cooling assistance, so that “LIHEAP is not the only source of assistance for low-income households with high home energy bills.” 

U.S. Department of Interior (DOI)
Minerals Management Service (MMS)
Included with the annual budget request from the President are a number of legislative proposals with potential fiscal impact for the federal budget or a particular program.   One such proposal outlined in the MMS budget request is to amend Section 35 of the Minerals Leasing Act to implement net receipts sharing whereby two percent would be deducted from the States’ share of receipts from Federal leasing activities under the Mineral Leasing Act.  The intent of this change is to defray a portion of the administrative costs incurred by Federal agencies.  This proposal comes on the heals of a legislative rider in the FY 2008 Omnibus Appropriations Package which enacted a one-year two percent net receipts sharing deduction for fiscal year 2008.  This proposal seeks to make such an authorization permanent.

Abandoned Mine Reclamation Fund
The program for fee collections and distribution of the mine reclamation fees was modified by the Surface Mining Control and Reclamation Act Amendments of 2006.  One major change provided for by the 2006 Amendments is that payments to states from the Abandoned Mine Reclamation Fund are mandatory funding as of FY 2008 and will be fully phased in by FY 2012.

U.S. Department of Agriculture (USDA)
Budget Overview
In the USDA budget, about 76 percent of outlays ($72 billion in 2009) are for mandatory programs, including the vast majority of the nutrition assistance programs; farm commodity programs; export promotion programs; and a number of conservation programs.  The remaining 24 percent of outlays ($23 billion in 2009) are associated with discretionary funding that must be specifically appropriated each year.  These include: some programs to address pest and disease threats; funds for the Special Supplemental Nutrition Program for Women, Infants and Children (WIC); rural development loans and grants; research and education; soil and water conservation technical assistance; management of National Forests and other Forest Services activities; and domestic and international marketing assistance.  It should be noted that the President’s Budget is being proposed without a completed Farm Bill.  While it does reflect some provisions of the Administration’s Farm Bill proposal, enactment of a new Farm Bill will affect some of the budget estimates. 

Rural Communities and Households
The President’s budget includes $1.6 billion in funding for new or improved water and waste water disposal facilities.  That level includes almost $1.4 billion in loans and loan guarantees and $220 million in grants to assist 1.4 million rural  households.  The budget promotes the use of guaranteed loans for housing assistance by providing an increase of $659 million of the 2008 level of $4.8 billion in single family housing loans, while eliminating more costly direct homeownership loans.  The budget also ensures that current recipients of rental assistance will receive support.  A total of $997 million would be provided for rental assistance--$897 million for rental assistance grants and $100 million for vouchers, rather than traditional unit-based assistance.

Protection and Safety of the Nation’s Agriculture and Food Supply
The President’s Food and Agriculture Defense Initiative
The $264 million  request for this initiative includes funds to maintain laboratory capacity needed to support the Food Emergency Response Network and implement the Electronic Laboratory Exchange Network.  In addition, the Agricultural Research Service (ARS) is requesting an increase of $14 million to enhance research to safeguard the nation’s food supply from foodborne pathogens and pathogens of biosecurity concern.   The Cooperative State Research, Education, and Extension Service (CSREES) would get $2.3 million for education and pest risk management tools for Asian Soybean Rust.  $2.2 million is requested for the National Animal and Plant Diagnostic Laboratory Network to assist in effective diagnosis and response to pest and pathogen threats.   

Food Safety and Inspection Service
The budget proposal also includes a request for $1.1 billion for the Food Safety and Inspection Service (FSIS).  This funding level is an increase of $22 million over the FY 2008 level, and the new funding would be a combination of appropriations and existing user fees.  (Legislation will be sought to expand user fees in 2009, with proceeds used to offset program costs in 2010.) 

Conservation Programs
Overall, the budget requests $4.6 billion for mandatory conservation programs.  The budget zeroes out two popular conservation programs—the Grasslands Reserve Program and the Wildlife Habitat Incentives Program.  The Conservation Reserve Program (CRP) is funded at $1.9 billion.  CRP received $2 billion last year.  A USDA official has noted that this funding level would not be enough to enroll new farmers to replace acres in current contracts farmers are withdrawing from the program.  The Wetlands Reserve Program (WRP) is only given enough funding ($181 million) to reach the program’s current cap.  Future spending on the Conservation Security Program (CSP) would be cut.  The level of $360 million proposed for FY 09 would be enough to continue current programs, but the budget reduces authority for the program by $80 million over the next 10 years.  Since this program is a favorite of Senate Agriculture, Nutrition and Forestry Chair Senator Tom Harkin (Iowa), this could be increased in a new Farm Bill.

For more information or any questions, please contact Tamra Spielvogel (Tamra.Spielvogel@ncsl.org), Lee Posey (Lee.Posey@ncsl.org), or Amanda Naughton (Amanda.Naughton@ncsl.org), at 202.624.5400.