Federal Budget & Tax Update
An Information Service of the AFI Federal Budget and Taxation Committee
February 11, 2000, Vol. 6, No. 2
Federal Budget and Tax Update Archives
The President's FY 2001--Continued Analysis
- The President's budget proposes $40 billion in spending for education programs, an increase of 12.6 percent over education spending in FY 2000. The overall budget for FY 2001 provides an increase in spending over FY 2000 of 2.5 percent, making education one of the big winners in the FY 2001 administration budget.
- Title I
funding for the disadvantaged would be increased by nearly $500 million and the president's class size reduction program (new teachers) would increase by $450 million to $1.75 billion.
- After-school programs
(21st century schools) would more than double to $1billion.
- Special education
programs would receive a slight increase of $333 million to $6.4 billion in the proposal. The increase, however, does not come close to the 40 percent federal funding level Congress originally targeted when IDEA was first passed. Under the proposal, the federal share is barely above 10 percent of the excess cost of educating a special education student that each state must bear.
- There are major increases proposed for post-secondary education (a cumulative 9.4 percent). Pell grants are increased. Work-Study Program and Perkins loan program increases total about $1 billion above FY 2000 levels.
- The president is proposing a new college tax cut which would give families the option to take a tax credit or tax deduction for post-secondary education. If fully phased in, a family could realize up to $2,800 in tax relief per year.
- In school construction, the administration is again proposing a $3.7 billion tax credit over five years, which is projected to leverage $25 billion in K-12 construction activity. On the spending side, the budget also includes a new $1.3 billion loan and grant program for urgent repair and renovation projects.
- NCSL Contact:
David Shreve
- FamilyCare Program.
Under a new FamilyCare program, states would receive an enhanced match for covering parents in the same program (either Medicaid or SCHIP) as their children. To pay for the cost of covering parents, the SCHIP allotments would be increased beginning in FY 2002. An additional $50 billion in allotments would be made available over the next ten years. SCHIP costs would be increased by $200 million in FY 2001 and $3.6 billion over five years. Medicaid costs for FamilyCare would be $60 million in FY 2001 and $10.2 billion over five years.
- Medicaid Administrative Cost Allocation
. Similar to the Agricultural Research law passed in 1998 and legislation proposed in 1999, this proposal would direct the Secretary of HHS to reduce each state's Medicaid grant award by the amount of administrative costs charged to AFDC in each state's TANF base year that could have legitimately been charged to Medicaid. Unlike last year's proposal, this proposal would permit states to use funds from their TANF block grants to cover the adjustment. The proposal would save the federal government $260 million in FY 2001; $2 billion over five years.
- NCSL Contacts:
Joy Johnson Wilson, Marla Rothouse
The president's budget contains a host of pension and public finance related tax provisions that are supported by NCSL. The following provides a short description of each of these and other provisions:
- Public Pensions.
The president's budget proposal contains tax provisions that would:
- allow portability of retirement assets between all retirement plans when employees switch jobs, including 401 plans, 403(b)'s, governmental 457 plans and IRAs;
- allows transfers from 457 and 403(b) plans to governmental defined benefit plans for the purchase of service credits or repayments of refunds;
- increase the compensation limit for defined contribution plans from 25 percent to 35 percent; and
- clarify the division of Section 457 assets upon divorce.
These provisions together would cost $4.4 billion over ten years and $53 million in FY 2001. These proposals have enjoyed wide bipartisan support from both the President and the Congress.
- Public Finance
. The president's tax package would increase and index the Low Income Housing Tax Credit per-capita cap, raising the annual state limitation to $1.75 per capita, currently set at $1.25 per capita, for FY 2001 and index the credit for inflation in FY 2002 and beyond. The cost of the change would be $6 billion in FY 2001 and $5.7 billion over ten years. Support to this provision has also enjoyed wide bipartisan support in the Congress.
- Environment.
The president's tax package also contains a permanent extension of expensing of brownfields remediation costs. The overall cost of the proposal is $1.1 billion over ten years.
- State Bank Fees.
The administration, as they did last year, proposes to require the Federal Deposit Insurance Corporation and the Federal Reserve to recover their costs for supervision and regulation of state-chartered banks and bank holding companies. The proposal would essentially impose new fees on state-regulated banks. The proposal would provide new federal revenues to the tune of $975 million over ten years. NCSL opposed this proposal last year and will do so again in FY 2001. Congress is not expected to accept this offset proposal.
- NCSL Contacts:
Gerri Madrid, Neal Osten (state bank fees)
Federal Budget and Tax Update Vol. 6, No. 1: President Proposes $1.8 Trillion Budget for FY 2001
President's Human Services Budget Proposals for States: More Funds, Some New Mandates for States
Highlights: President Clinton's Proposed FY 2001 Budget for Health Programs
Other Resources on the President's FY 2001 Budget (links)
|
