Federal Budget and Revenue Update

Federal Budget and Revenue Update

June 18, 2004
Volume 10, Number 2

An Information Service of the NCSL Budgets and Revenue Committee

Senate Holds Up Budget Resolution Process

A group of moderate Senate Republicans have effectively shut down the Senate’s passage of a budget resolution for the time being, in support of maintaining PAYGO rules. PAYGO requires mandatory spending increases and tax cuts to be offset. Reports suggest that Republican leadership, including Representatives Don Nickles (R-OK) and Bill Frist (R-TN), has worked in the past few weeks to appease, although unsuccessfully, the voting block of Senators Olympia Snowe (R-ME), Susan Collins, (R-ME), and Lincoln Chafee (R-RI). With or without a budget resolution, Senate appropriators have already begun work on their Homeland Security spending bill. Look for a set of continuing resolutions and an omnibus later in the year.

House Moves Forward with Appropriations Measures

In spite of a likely Senate stalemate on the budget, the House has decided to move forward in drafting its versions of the 13 annual appropriations measures. Expect Defense and Homeland Security Appropriations to be the first in line for passage from the House, which is working under a discretionary spending limit of $821 billion. The Senate’s pot is some $7.2 billion less. House appropriators already marked up 8 bills in either the subcommittee or full committee. Highlights from various House FY05 Appropriations measures include:

$4.1 billion for first responders, including $1.25 billion in basic formula grants to states/localities which is down from $1.7 billion in FY04 (these levels could be amended);
mandatory funding for food stamps set at $33.6 billion (an increase of $2.7 billion over last year);
an increase of $159 million for Byrne justice grants

House Export Tax Bill Includes Long Sought NCSL Provision

The latest House-passed version of the export tax bill, the American Jobs Creation Act of 2004 (H.R. 4520), includes a provision offered by Representative Kevin Brady (R-TX) to allow residents of all states to deduct the greater of their state and local sales taxes or their state income tax from their federal tax return in 2004 and 2005. In a June 4 NCSL press release, Pennsylvania Representative David Steil said that, “The sales tax deductibility provision will restore a certain level of fairness and equity to the federal tax system.” Some House Democrats sought to expand the provision to make it permanent and allow residents to itemize deductions for taxes on large purchases. The Senate version of the bill, passed in May, does not include the provision.

GAO Releases Report on State Fiscal Assistance

The General Accounting Office (GAO) released a report on June 8 to examine the one-time $10 billion in fiscal assistance that states received as part of the Jobs and Growth Tax Relief Reconciliation Act. The one-time general use funds were part of a major lobbying victory for NCSL last year as Congress dutifully responded with countercyclical assistance as state budget gaps reaching record levels of $25.7 billion in early 2003. While GAO criticized the timing of the dispersal of the payments and the formula for distribution, it did make note that, “…the fiscal relief payment likely helped resolve ongoing budgetary problems”¹ which were partially a result of a dip in employment levels.

¹ General Accounting Office, GAO-04-736R Temporary State Fiscal Relief, May 7, 2004

For more information contact NCSL staff: Molly Ramsdell or Nick Steidel.