Budget and Revenue Standing Committee

Federal Budget and Revenue Update

February 6, 2007
Volume 13, Number 4

An Information Service of the NCSL Budgets and Revenue Committee

Note: This document is based on a preliminary review of the President's FY2008 budget proposal. Not all programs and activities are covered.

President Releases FY 2008 Budget

President Bush released his FY2008 budget on February 5, 2007. The budget, which weighs in at $2.9 trillion, includes large increases for defense spending and holds non-defense, non-homeland security spending to 1 percent growth (see table 1). In addition, the president’s budget proposes to:

eliminate 141 programs, resulting in $12 billion in savings.
provide for a $96 billion reduction in federal spending in mandatory programs over the FY 2008-2012 period (this includes a $12 billion reduction over 5 years in federal Medicaid spending);
make permanent certain tax actions enacted in 2001 and 2003, at a cost of $373 billion over the FY 2008-2012 period.
increase a number of user fees, thereby generating $7 billion over 5 years; and
balance the budget by FY 2012.

Table 1: Discretionary Totals

(in billions)

Discretionary Budget Authority

2007 Current

2008 Request

Percentage Change

Department of Defense and homeland security activities government-wide

$500.4

$553.9

10.7%

Other

$372.4

375.9

1.0%

Total

$872.8.3

$929.8

6.5%

Over the next few weeks, the House and Senate Budget Committees will craft their respective budget resolutions to guide spending choices, both discretionary and mandatory. The resolution is not formally a law so it does not require the President’s signature. The amounts set in the resolution are translated into allocations to the Appropriations Committees for discretionary programs and sets the stage for potential cuts and changes to mandatory or entitlement programs through a budget reconciliation bill. The target date for completion of these decisions is the new fiscal year, which begins on October 1, 2007. However, Congress has rarely met this date and often uses continuing resolutions during the interim.

Below is a summary of select provisions in the President’s FY 2008 budget request.

Agriculture: Proposes to cap nutrition services and administration funding in the Special Supplemental Nutrition for Women, Infants and Children (WIC) program at 2006 levels. Includes a legislative proposal to limit the Food Stamp Program categorical (automatic) eligibility to households that receive Supplemental Security Income or Temporary Assistance to Needy Families (TANF) cash assistance. It also proposes to exclude retirement savings and combat-related military pay when determining eligibility for the program. Eliminates funds for the Commodity Supplemental Food Program, (CSFP), calling it “duplicative” of the Food Stamp and WIC programs.

Education: Proposes to terminate 43 programs and reduce funds for others, including drug free schools state grants and special education state grants. Proposes to redirect $1.2 billion of the funds to core Title I programs (No Child Left Behind), with some of the funds targeted for high schools. Redirects $500 million for schools in need of improvement. In addition, the administration proposes to add two new high school tests, including an assessment of college readiness, with no funds provided to develop the standards and assessments.

Environment: Provides $688 million for the clean water state revolving fund (SRF), a reduction of nearly $400 million from the continuing resolution (CR) currently on the Senate floor

Homeland Security: Provides zero funds in FY 2008 for state implementation of the Real ID. Further reduces the State Homeland Security Grant Program (SHSGP) to $250 million, of which $62.5 million is for the Law Enforcement Terrorism Prevention Program (LETPP). This is a reduction of $275 million below FY2007 levels. Proposes to lower the state grant minimum under SHSGP from 0.75 percent to 0.25 percent. Provides an additional $30 billion, bringing the total to $800 million, for the Urban Area Security Initiative (UASI). Reduces funds for the (LETPP) from $375 million to $263 million. Eliminates funds for the Metropolitan Medical Response System (MMRS) program.

Human Services: Reduces funds for the Social Services Block Grant by $1.9 billion over the FY 2008-2012 period (approximately $400 to $500 million per year). Eliminates funds for the Community Services Block Grant. There are two TANF legislative proposals—places where the Administration is noting that it may seek congressional action. One is to extend the authorization for TANF Supplemental grants through 2010 at $310 million a year, and the other is “simplifying the two-parent work requirement in the TANF program” by requiring the same state work participation rate, a change states have long sought.

Justice: Eliminates funds for the State Criminal Alien Assistance Program (SCAAP). Consolidates 70 existing state and local law enforcement assistance programs, including the Byrne Justice Assistance program and Justice Assistance Grant, into four programs. While a number of these programs were previously formula grants, all of these funds will now be awarded on a competitive basis. The consolidation results in a reductions of funds. NCSL is still trying to determine the figure.

Labor: As in previous years, consolidates funds for dislocated worker assistance, adult and youth training, and employment services state administration and creates in its place Career Advancement Accounts—self-managed accounts for certain workers in need of new skills/training. The consolidation of these programs includes an estimated $500 million reduction in funds from FY 2007 levels.

Medicaid: Through a series of reforms, reduces federal spending in Medicaid by $1.9 billion in FY 2008 and by $12 billion over the FY 2008-2012 period. Proposes to limit the State Children’s Health Insurance Program (SCHP) to uninsured children below 200 percent of the federal poverty level. (Additional details will be provided on Medicaid and proposed health spending in a subsequent correspondence).

Medicare: Reduces federal spending in Medicare by $2.6 billion in FY 2008 and $66 billion over the 2008-2012 period. (Additional details will be provided on Medicare and proposed health spending in a subsequent correspondence).

Budget Enforcement: Proposes statutory caps on discretionary spending through 2012. Any appropriations bill that causes the caps to be exceeded would be subject to a point of order (requiring a three-fifths vote in the Senate). If the aggregate appropriation action exceeds the spending caps, then the Office of Management and Budget would be required to make across-the-board cuts to reduce total discretionary spending to the statutory caps. In addition, the budget proposes earmark reform and legislative line-item veto authority for the President.

For additional information contact NCSL staff: Molly Ramsdell (molly.ramsdell@ncls.org, 202-624-3584) or Garner Girthoffer (garner.girthoffer@ncsl.org, 202-624-7753).

Sources: (Includes excerpts from the sources listed below)

Fiscal Year 2008 Budget of the U.S. Government

Fiscal Year 2008 Budget of the U.S. Government: Analytical Perspectives

Fiscal Year 2008 Budget of the U.S. Government: Historical Tables

Fiscal Year 2008 Budget of the U.S. Government: Appendix

Various Federal Department Press Releases

The overall budget can be found on the White House website at: http://www.whitehouse.gov/omb/