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

Volume 19   Issue 17 - May 25, 2012

 

DEFICITS, DEBTS AND DELAYS

A new Congressional Budget Office report offers states an in-depth glance at the fiscal challenges federal policymakers must resolve, clarifying what the trade-offs might be concerning appropriations, taxes, the debt ceiling, and efforts to reduce the deficit. The report, “Economic Effects of Reducing the Fiscal Restraint That Is Scheduled to Occur in 2013,” not surprisingly concludes “putting the [federal] budget on a sustainable path will require significant changes in spending policies, tax policies, or both.” Bottom line: If Congress keeps the appropriations sequester, sunsets the tax cuts from 2001, 2003 and 2010, and does not change the alternative minimum tax, Medicare reimbursements rates, payroll tax reductions, the extended unemployment compensation and tax extenders, the federal deficit will drop by $560 billion in FY 2013. At the same time, those actions will likely reduce economic growth to 0.5 percent. Reaction to the report has been predictable. Deficit reduction hawks claim it fortifies the case for comprehensive, long-term deficit reduction and debt management. Tax cut proponents argue the report supports keeping the current reduced tax rates. Sequester opponents say it justifies eliminating or restraining spending cuts. In other words, yet another fact-filled report that can’t detour the federal political penchant to head straight toward a “fiscal cliff,” or “Crash of 2012,” “Taxageddon,” or “December to Remember” —all code words for inaction before Nov. 6. The full CBO report is available at: http://www.cbo.gov/sites/default/files/cbofiles/attachments/FiscalRestraint_0.pdf. NCSL staff contacts: Michael Bird, Jeff Hurley


ON THE DEFENSIVE

States with economies linked to military and defense spending are receiving very mixed messages from the nation’s capital. The House recently passed H.R. 4310, the FY 2013 defense authorization bill which would boost defense spending by $8 billion beyond the cap agreed to last year in the Budget Control Act. It includes $88 billion for overseas military operations in Afghanistan and anti-terrorism activities. It imposes restrictions on detainee transfers from Guantanamo Bay, restricts nuclear weapon decommissioning and prohibits any new base closures. The Senate will soon mark up its own defense authorization bill adhering to last year's spending caps. And there’s the sequester looming, which would require $492 billion in defense savings over nine years. The House calls for repealing the sequester (H.Con.Res 112—the House budget resolution) and substituting it with cuts in entitlement, mandatory, federal employee and other programs (H.R. 5652—the House budget reconciliation legislation). This week Senate Majority Leader Harry Reid affirmed the sequester would remain until a comprehensive deficit reduction plan is enacted. The president has staked out a similar position. For states, the messages will remain mixed until after the November elections—and will likely be punted to the 113th Congress. NCSL staff contacts: Michael Bird, Jeff Hurley


RACE FOR MORE EDUCATION FUNDING

Rules for the latest release of $400 million in Race to the Top grants were issued Tuesday. In this round, school districts, a combination of school districts, and charter schools may apply. The Department of Education will select between 15 and 20 winners, with awards ranging from $15 million to $25 million. Who will succeed? The department is looking for “four assurances” candidates will work on: improving teacher quality, turning around low-performing schools, boosting the quality of data, and improving standards and assessments. Additional requirements can be found on the department’s website at: http://www2.ed.gov/programs/racetothetop-district/index.html. NCSL staff contacts: Lee Posey, Michael Reed


HALFWAY HOME

After approving three more measures this week, the Senate Appropriations Committee has passed the halfway mark on spending bills, although none have yet been approved by the entire chamber. This is one more than the House committee, which has passed six of 12 appropriations bills, with one approved by the full House. Debated this week were State-Foreign Operations, Military Construction-Veteran’s Affairs, and Homeland Security. The latter was the only one that faced major obstacles due to a proposal that would authorize the Transportation Security Administration to increase airline passenger security fees. For states, the Homeland Security legislation would provide $1.41 billion in state and local grants, almost a $400-million boost from FY 2012. The Senate will look to match the House in early June, by passing its first spending bill, most likely for commerce, justice and science programs. NCSL staff contacts: Michael Bird, Jeff Hurley (appropriations generally), Jennifer Arguinzoni (homeland security)