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

Volume 19   Issue 28 - September 14, 2012

CONGRESS TAKES ONE SMALL FISCAL STEP

At last some certainty for states on federal fiscal activity! Yesterday, the U.S. House of Representatives approved H.J. Res. 117. This continuing resolution funds state-federal discretionary, mandatory and entitlement programs for the first six months of federal fiscal year 2013 (March 27, 2013) at 0.6 percent above FY 2012 levels—in accord with the ceilings set in the Budget Control Act of 2011. For states, this lifts the uncertainty surrounding continued authorization for the Temporary Assistance for Needy Families (TANF) block grant, the Child Care and Development Block Grant (CCDBG), and administrative funds for the Supplemental Nutrition Assistance Program (SNAP). Both were scheduled to sunset Sept. 30, 2012. The resolution also ensures regular distributions of Low Income Home Energy Assistance Program (LIHEAP) funds, designates funds for wildfire management and disaster assistance, adds funding for veterans’ disability claims and maintains the federal employee pay freeze. In addition, it orders the U.S. Department of Education to report by Dec. 2013 the number of public school students who have disabilities, attend schools in rural areas, come from low-income families, or are learning English from “alternatively-certified” instructors to address concerns about the No Child Left Behind Act's requirement that all teachers be “highly qualified.”
 
H.J. Res. 117 passed the House 329-91. The administration along with House and Senate leaders are in bipartisan agreement to move this legislation, which moves to the Senate next Wednesday. Remember: This is only a temporary fix. States will face federal funding uncertainty once again with the looming March 27, 2013 sunset date. Whether appropriators will try to complete their dozen annual spending bills or seek a second continuing resolution is unpredictable now. NCSL staff contacts: Michael Bird, Jeff Hurley (appropriations generally), Sheri Steisel, Emily Wengrovius (TANF, SNAP), Lee Posey, Michael Reed (education) 


 

SEQUESTRATION UPDATE

The $108 billion in across-the-board FY 2013 domestic defense and non-defense cuts (“sequestration”) ordered by the 2011 Budget Control Act were under the federal microscope this week. For the second time, the House passed legislation to replace the estimated $55 billion in sequestration cuts to defense programs in FY 2013. But the legislation looks likely to suffer a similar fate as the first bill, which passed the House but fizzled out in the Senate. Another effort to do-away with sequestration is being led by a bipartisan “Gang of Eight” senators who are working to reduce the debt by almost $5 trillion by targeting  entitlement programs and reforming the federal tax code. Nevada Senator Harry Reid has called for another round of negotiations to address their recommendations. Chances of that happening before the Nov. 6 election are remote to impossible, however. Meanwhile, the White House today is expected to release the long-anticipated report detailing the effect sequestration will have on both domestic and defense spending—mandated under H.R. 5872—which also requires the administration to show how sequestration will be implemented. Please go to NCSL’s new webpage,  http://www.ncsl.org/issues-research/budget/federal-deficit-reduction-overview.aspx to find information on sequestration, the “fiscal cliff,” and other federal deficit reduction news. NCSL staff contacts: Michael Bird, Jeff Hurley


 

NEGATIVE OUTLOOK

On Tuesday, Moody’s Investor Services threatened to become the second credit rating agency to downgrade the country’s top AAA rating, following Standard & Poor’s move last fall lowering the U.S. to AA+ status after the quagmire to increase the nation’s debt limit. Last year Moody’s offered a warning to the U.S. government by issuing a “negative outlook.” This week, Moody’s issued a report that noted the AAA rating was in danger unless a plan was reached to stabilize and reduce the federal debt to GDP ratio over the medium term. The effects of such a downgrade could potentially trickle-down to state and local governments, reducing their credit worthiness and increasing their borrowing costs. NCSL staff contacts: Michael Bird, Jeff Hurley