HOUSE RULES FOR THE 112TH CONGRESS AND STATE-FEDERAL FISCAL RELATIONS

January 13, 2011

 

On Jan. 5, 2011, the U.S. House of Representatives adopted H. Res. 5 (Virginia Rep. Eric Cantor), legislation establishing governing rules for the chamber for the next two years. The rules passed 238-191 and represent continuations of and modifications and additions to rules used by the House in the 111th Congress. The rules only affect the House but have implications for policymaking beyond that.

RULES THAT COULD AFFECT STATE-FEDERAL FISCAL RELATIONS

DISCRETIONARY SPENDING CAPS. H.Res.5 empowers the Chairman of the House Budget Committee alone to establish domestic and defense discretionary spending caps for the current federal fiscal year, FY 2011. At present, the federal government and discretionary state-federal programs are collectively funded at FY 2010 levels (plus $1.1 billion) through a fourth continuing resolution (CR) that expires on March 4, 2011. Some members of Congress have urged adoption of a domestic and defense discretionary spending cap equivalent to that of FY 2008 for FY 2011. This action would require cuts of approximately $100 billion. If done on an across-the-board basis, with defense and homeland security exempt from cuts because they have been in recent years, state-federal programs would experience at least a 10 percent reduction in federal funds anticipated for the current fiscal year.

In a typical year, Congress passes a budget resolution. Caps on domestic and defense discretionary spending are usually included in this resolution. Congress failed to pass a budget resolution for FY 2011 and is therefore operating on the “ceiling” left over from the previous fiscal year. H.Res. 5 gives the House Budget Chair an opportunity to establish that ceiling unilaterally. No such authority exists on the Senate side and there is no indication from the administration at this time that a ceiling other than the one assumed in the current CR should be adopted. It is highly likely that this issue will be the focus of much discussion between now and March 4.

PAYGO. Both the House and Senate operate under “PAYGO” rules and statutes, with certain programs or issues exempt. In general, PAYGO and budget reconciliation laws have required Congress to find revenues or funding cuts among state-federal and other entitlement and mandatory programs in order to compensate for proposed increases in entitlement and mandatory program spending or reduced revenues stemming from tax reductions. H.Res. 5 modifies the PAYGO playing field by explicitly exempting tax cuts and legislation repealing federal health care reform laws from PAYGO requirements (and has earned the budgetary parlance of “CUTGO”). This means action on either of these two issues does not require offsets and can increase the deficit in contrast to the budget neutrality currently required under budget reconciliation and PAYGO requirements. H.Res. 5 additionally imposes a point of order against any legislation expanding mandatory or entitlement programs by $5 billion or more in any of the four decades following the first 10-year budget window. With the Senate operating under a different set of conditions and requirements, this issue will also generate much discussion in weeks ahead.

PROGRAM ELIMINATION OR MODIFICATION. H.Res. 5 requires House standing committees to propose cuts to or elimination of inefficient, duplicative, or outdated programs or to propose elimination of federal funding participation in programs “more appropriate for state and local government administration.” This rule builds on previous congressional oversight efforts and strategies deployed both by the current and previous administration to terminate programs. No timetable has been set for putting this new effort into motion, but states should expect that some program terminations or consolidations will be placed on the table as the March 4 CR deadline approaches.

EARMARKS. H. Res. 5 is silent on this issue but congressional leadership is in the position of blocking any legislation coming to the floor with earmarks from consideration. The current CR has no new earmarks. The House appears intent on enforcing a “no earmark” regime for the near future while the Senate is split.

LOCKBOX. Cuts to discretionary programs can be set aside in a separate “lockbox” for deficit reduction only. In previous Congresses, cuts made to discretionary programs typically made more funds available to other “priorities’ and programs. Again, this rule only affects the House and would become a future point of negotiation on every appropriation bill or any omnibus appropriation bill.

HIGHWAY, MASS TRANSIT APPROPRIATIONS. H.Res. 5 removes the old “firewall” around funding from the Highway Trust Fund and reinstates authority of appropriators to set limits on annual spending from the Highway Trust Fund, including spending levels below levels authorized by the committees of jurisdiction. This provision reflects the fluidity surrounding reauthorization of the SAFETEA-LU program, reluctance of some to continue to borrow general funds to fill in gaps between Highway Trust Fund balances and authorized spending levels, and long-standing tension between appropriators and authorizers. And the state-federal nature of this program is caught in the middle of this situation.