Capitol to Capitol
An Information Service of NCSL's Standing Committees

Volume 18   Issue 29 - August 15, 2011



The United States avoided an unprecedented federal default on Aug. 2 when President Obama signed into law the Budget Control Act of 2011 (S. 365), which passed the House 269-161 and subsequently cleared the Senate 74-26. The final agreement reduces the federal deficit between $2.1 trillion and $2.4 trillion and raises the federal debt ceiling until after the 2012 elections. The first stage of the package will decrease spending by $917 billion through 10-year caps on discretionary spending. Actual long-term cuts save roughly $750 billion with the remaining saving coming from reduced debt service.  The discretionary spending cap would limit appropriations for FY 2012 to $1.043 trillion, $6.8 billion less than current levels. The second phase of S. 365 charges a newly formed Joint Select Committee on Deficit Reduction to find $1.2 trillion to $1.5 trillion in savings, with discretionary spending, federal entitlements, and the tax code all ‘on the table.’ If the joint committee is unable to reach an agreement by the end of 2011, it would trigger automatic cuts to defense spending and across-the-board cuts to non-defense spending, up to $1.2 trillion. Exempted from these cuts are programs for ‘vulnerable populations,’ including but not limited to: Medicaid, unemployment insurance, temporary assistance for needy families (TANF), and child nutrition programs. The Budget Control Act immediately increased the debt limit by $400 billion, and will increase it an additional $500 billion later this year before being boosted by the $1.2 trillion to $1.5 trillion in cuts tasked to the joint committee. On Aug. 15, NCSL leaders sent a letter to congressional leaders and the 12 members of the joint committee expressing NCSL’s intention to work with Congress in achieving a balanced approach to finding savings and by designating several deficit reduction priorities. This letter is available at: NCSL staff contacts: Michael Bird, Jeff Hurley.


The 12 members (three members from each party in each chamber) of the Joint Select Committee on Deficit Reduction were named last week by congressional leaders: Sen. Patty Murray of Washington, Sen. Max Baucus of Montana, Sen. John Kerry of Massachusetts, Sen. Jon Kyl of Arizona, Sen. Pat Toomey of Pennsylvania, Sen. Rob Portman of Ohio, Rep. Jeb Hensarling of Texas, Rep. Dave Camp of Michigan, Rep. Fred Upton of Michigan, Rep. Jim Clyburn of South Carolina, Rep. Xavier Becerra of California and Rep. Chris Van Hollen of Maryland. Murray and Hensarling were named co-chairs. Eight have served either on the president’s National Commission on Fiscal Responsibility and Reform or have engaged in mid-summer deficit reduction negotiations led by Vice President Joe Biden. Murray, Kyl and Hensarling all hold leadership positions within their chamber and Baucus and Camp chair their respective tax-writing committees. The joint committee will hold its first meeting on Sept. 14, is tasked with finding $1.2 trillion to $1.5 trillion in savings and is required to release legislative language by Nov. 23. NCSL staff contacts: Michael Bird, Jeff Hurley.


Legislation authorizing states to collect sales and use taxes from remote sellers has been introduced and is now ready for congressional action. State legislators should contact their congressional delegations and urge co-sponsorship of S. 1452 and H.R. 2701—“The Main Street Fairness Act.” This legislation would allow states to generate, according to 2012 estimates from the University of Tennessee, an estimated $23.3 billion in uncollected taxes from out-of-state sales, with more than $11.3 billion alone from electronic commerce transactions. S. 1452 is sponsored by Illinois Sen. Dick Durbin, South Dakota Sen. Tim Johnson and Rhode Island Sen. Jack Reed. H.R. 1452 is sponsored by Michigan Rep. John Conyers, Vermont Rep. Peter Welch and North Carolina Rep. Heath Shuler. As states continue to confront fiscal challenges such as the closing of FY 2012 budget gaps totaling $72 billion according to NCSL, it is essential that states get congressional authorization to collect revenue from remote sales. “We’re not talking about adding a new tax on Internet commerce. We’re correcting a tax avoidance problem,” said Massachusetts Sen. Richard Moore, NCSL’s immediate past-president. He added that “allowing some remote sellers to avoid this tax is unfair to the main street merchants that make up the lifeblood of our local communities.” NCSL staff contacts: Neal Osten, Max Behlke


State airport grants continue; 4,000 Federal Aviation Administration employees return to work; 200 airport construction projects re-start; airline ticket taxes start generating revenue again after a loss of $300 million. All of this is due to enactment of H.R. 2553 on Aug. 5, 2011. However, all of these activities could possibly cease again since H.R. 2553 extends aviation administration authority only until Sept. 16, 2011. H.R. 2553 temporarily settled one of the major bones of contention between House and Senate negotiators by   calling for reduced funding to the Essential Air Service program. The House insisted on this reduced spending.

However, Transportation Secretary Ray LaHood is empowered to waive cuts to any airport’s operations, effectively negating the agreement. When Congress reconvenes, it will have less than a week’s worth of legislative days to resolve aviation-related issues that have gone unresolved for four years. NCSL staff contacts: Molly Ramsdell, Helen Narvasa


The Budget Control Act (see above story) calls for cutting $917 billion in discretionary spending over 10 years, including $6.8 billion for upcoming FY 2012. There are only 11 legislative days left, however, until the current federal fiscal year ends to address a nearly $4 trillion budget. The House has finished half of its dozen FY 2012 appropriations bills—which are on course to reduce next year’s discretionary spending by more than $30 billion. The Senate has addressed only one bill. Does this mean a continuing resolution? If so, would it be at FY 2011 levels, or would it have to match some of the cuts sought by the House? Will some members insist on not exceeding the Budget Control Act’s target for next year? Is another federal government shutdown on the horizon? And, all of this happens as the Joint Select Committee on Deficit Reduction starts its march toward its Nov. 23, reporting deadline. As of today, it promises not to be pretty. NCSL staff contacts: Michael Bird, Jeff Hurley