Federal Budget and Revenue Update
January 20, 2006
Volume 12, No. 1
An Information Service of the NCSL Budgets and Revenue Committee
RECONCILIATION IN 2006
The FY 2006 Budget Resolution (H. Con. Res. 95), contained reconciliation instructions that directed Congress to: (1) reduced mandatory spending by $34.7 billion over the same time period; (2) provide a total of $105.7 billion in tax relief ($70 billion to be reconciled); and (3) increase the statutory debt ceiling.
Here is where things stand when Congress returns later this month.
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REDUCTIONS IN MANDATORY SPENDING
The House will reconvene at the end January to address changes made by the Senate to the conference agreement on S. 1932. The Senate struck three provisions from the agreement that violated Senate rules. Because the House had already recessed and unanimous agreement to accept the Senate’s changes was not forthcoming, a second vote will be held on February 1. A reminder: the prior conference report passed the House by a vote of 212 to 206.
As it currently stands, S. 1932 affects states as follows: | |
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What is Reconciliation?
A process used if the budget resolution (BR) calls for levels of entitlement spending or taxation that are different from what would occur if current law remained unchanged. The BR contains instructions to specific committees that include the dollar changes to be achieved and a deadline by which the legislation is to be reported. | |
TANF BLOCK GRANT
The conference agreement for S.1932 contains a five-year reauthorization of TANF, tougher work requirements for states to achieve, repeal of the high performance bonus, a three-year extension of TANF supplemental grants, a $200 million per year increase in mandatory child care funding and a one-year extension of transitional medical assistance (TMA).
MEDICAID
This state-federal partnership contributes a net $4.8 billion for spending reconciliation savings. Savings come from tightening asset transfer rules and altering the definition of targeted case management services. Future savings for both state and federal governments come from various provisions that reduce costs for prescription drugs. States would gain flexibility to increase cost sharing and impose benefit reductions for Medicaid beneficiaries. The legislation imposes new limits on imposition of provider taxes on managed care organizations. The conference agreement contains $2.1 billion for Katrina-related health care costs and authorizes states to allow families with disabled children with incomes up to 300 percent of the poverty level to purchase Medicaid coverage
CHILD SUPPORT ENFORCEMENT
The conference agreement for S. 1932 prohibits states from receiving federal matching funds for the incentive payment funds they spend on child support enforcement. The conference agreement’s provisions represent an intergovernmental mandate as determined by the Congressional Budget Office (CBO), represent a cost shift to states of $1.5 billion and will, according to CBO, result in lower child support collections.
CHILD WELFARE
The conference agreement reduces state access to federal funding for families who take in foster care children, while limiting the duration for which unlicensed foster care homes can qualify for federal foster care assistance.
LIHEAP
The conference agreement has increased LIHEAP authorization an additional $1 billion for FY 2007. In addition, it appears that Congress will revisit LIHEAP in the upcoming session because both houses have passed legislation to substantially increase LIHEAP allocations.
SPECTRUM PROVISIONS
The conference agreement sets the deadline for termination of analog spectrum service for February 18, 2009, while allocating $2.4 billion to assist state and local government with interoperability issues and for a program through which households in the United States may obtain coupons that can be applied toward the purchase of digital-to-analog converter boxes. NCSL continues to support efforts by the federal government that will provide sufficient spectrum allocation to state and local government for public safety services.
TAX RELIEF
Conference on the tax reconciliation measures (S. 2020, H.R. 4297) can not commence until the House reconvenes on January 31, 2006. The short-term alternative minimum tax (AMT) relief provisions and a two-year extension of reduced rates on capital gains and dividend income will be on the agenda. Both bills extend the option of state and local tax deductibility for an additional one year, to expire on January 1, 2007.
STATUTORY DEBT LIMIT INCREASE NEEDED
On December 29, 2005, Treasury Secretary John Snow advised Congress that an increase in the statutory debt ceiling was necessary to continue to finance government operations. The debt limit, currently $8,184 billion, will be reached by mid-March if the Treasury Secretary exercises appropriate precautionary actions.
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