Overview of the President's FY12 Budget

On February 14, 2011, the President introduced his FY 2012 budget proposal, which weighs in at $3.7 trillion.  This includes over $2.4 trillion for mandatory programs (Social Security, Medicare, Medicaid, etc.) and $1.3 trillion for discretionary programs. With revenue expectations of $2.6 trillion, the President's budget projects a deficit of $1.1 trillion. 

Below are some issue-specific highlights.


  • Includes $2.4 billion in budget authority for Rural Development to support a program level of $36 billion in loans, grants and other assistance.
  • Proposes statutory reductions in the current cap on direct payments and a three year phased reduction in farm program average Adjusted Gross Income (AGI) eligibility limits for large farmers and wealthy landowners.
  • Seeks legislation to create two user-fees associated with Food Safety and Inspection Service.

Arts and Culture

National Endowment of the Arts (NEA)/ National Endowment of the Humanities (NEH)
The President’s budget proposes a combined $46 million in cuts from the National Endowment for the Arts and the National Endowment for the Humanities. The administration has encouraged the two programs to continue to consolidate operations to partially offset this reduction in funding.

Arts in Education Program
The Arts in Education Program, through the U.S. Dept. of Education supports noncompetitive awards to VSA Arts, a national program that fosters arts programs for persons with disabilities as well as arts education programs at the Kennedy Center. The President has proposed that Arts in Education be consolidated into the Department’s proposed Effective Teaching and Learning for a Well-Rounded Education initiative.


As part of the President's Wireless Innovation and Infrastructure Intiative the budget proposes providing additional spectrum to public safety in the 700 megahertz band known as the "D Block" valued at $3.2 billion.  This is in addition to $7 billion in mandatory funding over the next several years to assist in the deployment of an interoperable broadband network for public safety.

Economic Development Administration (EDA)
EDA assists states, regions and communities in promoting a favorable business environment through capacity building, planning, infrastructure investments, research grants, and initiatives. The President’s FY2012 budget proposes funding EDA at $325 million. This is an increase of $32 million from 2010, which will support planning, capacity building and capital projects. This year’s budget proposal focuses efforts on supporting more regional programs like the new Regional Innovation Program authorized in the America COMPETES Reauthorization Act.

International Trade Administration (ITA)
ITA provides support to U.S. commercial interests through a variety of activities including strengthening the competitiveness of American industries and workers, promoting trade and investment, and ensuring compliance with both domestic and international trade laws and agreements. The President’s FY2012 budget requests $517 million for ITA, an increase of $70 million from 2010. This significant increase is due to the President’s commitment to double U.S. exports over five years through the National Export Initiative. 


Title 1 Grants to LEAs (as a part of a “reauthorized and strengthened” Title 1, Part A College-and-Career-Ready Students program)
The President requests $14.8 billion for Title 1 grants to LEAs.  This amount includes $300 million for a Title 1 Rewards Authority that would provide financial rewards for LEAs that reach annual performance targets, significantly increasing academic achievement for all students and closing achievement gaps.

New Competitive Grant Programs
The President’s budget proposal includes $1.4 billion for new competitions modeled on the Race to the Top competition:

  • New Competitive Early Learning Challenge Fund for States ($350 million);
  • New K-12 Race to the Top program for school aimed at reform at the school district level ($900 million); and
  • New “First in the World” competition to test, validate, and scale up effective approaches to improving college access and generating better outcomes from education dollars ($150 million).

Consolidating Educations Programs
The President’s budget proposes consolidating 38 K-12 programs it considers duplicative or inefficient into 11 programs and eliminating 13 discretionary programs at the U.S. Department of Education. 

Pell Grants
The budget provides funding to sustain Pell grants at the recently increased level of $5,500. The administration is preparing a Pell Grant Improvement Act that would eliminates the “year-round” Pell Grant, which provides two grants in a single award year, and create a long-term funding stream for the Pell Grant program by eliminating ineffective in-school interest subsidy for graduate students. 


  • Provides a $110 million increase in the FY 2012 budget request for Weatherization Assistance Grants over the FY 2010 appropriation.  The current FY 2010 appropriation is $210 million and the FY 2012 budget request is $320 million.
  • Increases $13.8 million in the FY 2012 budget request for the State Energy Program (SEP) over the FY 2010 appropriation.  The current FY 2010 appropriation is $50 million and the FY 2012 budget request is $36.2 million.
  • While the Energy Efficiency and Conservation Block Grant (EECBG) program and the Energy Efficient Appliance Rebate Program were both funded by the American Recovery and Reinvestment Act (ARRA), neither program received funding in the current FY 2010 appropriation and the Administration is not requesting any funds for the programs in FY 2012.


Provides a cut to State Revolving Funds (SRF) of $947 million to a total of $2.54 billion

  • Proposes $1.55 billion for the Clean Water State Revolving Fund, a decrease of $450 million.
  • Proposes $990 million for the Safe Drinking Water State Revolving Fund, a decrease of $310 million

Does not provide funding for the Diesel Emissions Reduction Grant Program, but ongoing projects will continue to be supported.
The FY 2012 request includes $327.1 million for grants to support state, local, and tribal air management and radon programs, an increase of $79.2 million.




  • Reduces Medicaid provider tax threshold beginning in 2015. This proposal would limit State financing practices that increase Federal Medicaid spending, by phasing down the Medicaid provider tax threshold over three years, starting in 2015, to 3.5 percent in 2017 and beyond. Restricting the use of provider taxes was recommended by the National Commission on Fiscal Responsibility.
  • Prohibits States from using Federal funds as the State share of Medicaid or CHIP, unless specifically authorized by law. This proposal would prohibit States from using Federal funds as the State share of Medicaid or CHIP unless funds are specifically provided for that purpose under law.


  • Uses a portion of Recovery Audit Contractor (RAC) recoveries to implement actions that prevent improper payments and fraud. This proposal would allow CMS to use up to 25 percent of RAC recoveries that would otherwise be returned to the Trust Funds and the Treasury to prevent improper payments and fraud, thus helping to avoid costs associated with pursuing recoupment after payments have been made.
  • Provides flexibility to the Secretary in implementing predictive analytics technologies for claims payment to maximize cost effectiveness. Statute currently requires the Secretary to broadly implement predictive analytics technologies, even when more cost-effective tools may be available. This proposal allows the Secretary to target this technology toward issues with the greatest return on investment.


  • Recovers erroneous payments made to insurers participating in Medicare Advantage. Medicare Advantage plans receive payments that are adjusted based on whether or not beneficiaries have certain health conditions that result in higher costs. CMS audits a sample of plans' records to validate the accuracy of adjusted payments, based on beneficiaries' documented health conditions (validation audits). This proposal would require CMS to extrapolate the error rate found in risk adjustment validation audits to the entire Medicare Advantage plan payment for a given year, leading to recoupment of billions of dollars in overpayments made to these plans.
  • Increases scrutiny of providers using higher-risk banking arrangements to receive Medicare payments. This proposal would require providers to report use of "sweep accounts" (accounts that automatically transfer funds to separate accounts, which have been linked to fraudulent providers) for receipt of Medicare payments. Providers with such accounts would be targeted for enhanced scrutiny.

Homeland Security 

State Homeland Security Grant Program (SHSGP) - $1.050 billion; increased from $852 million in the continuing resolution and 2010.

  • Operation Stonegarden (formerly the Southwest Border Initative) $50 million; increased from $38 million in the CR and in 2010. It has been moved over from the Department of Justice budget and is to be used from the SHSGP funds
  • Interoperable Emergency Communications Grants Program is zeroed out from $48 million in the CR and in 2010 (now considered an allowable exepense under SHSGP and is no longer a separate funding stream).
  • Metropolitan Medical Response System is zeroed out from $39 million in the CR and in 2010 (now considered an allowable expense under SHSGP and is no longer a separate funding stream).
  • Real ID is zeroed out from $48 million in the CR and in 2010 (now considered an allowable expense under SHSGP and is no longer a separate funding stream).

Citizen Corp Grant Program is increased to $13 million from $12 million in the CR and in 2010.
Urban Area Security Initiative is increased to $920 million from $852 million in the CR and 2010.
State and Local Training, Measurement, and Exercise Programs are decreased to $128 million from $186 million in the CR and 2010.

Housing and Urban Development

Choice Neighborhoods
The Choice Neighborhoods initiative provides assistance to high-poverty neighborhoods where HUD-assisted public and privately-owned housing is located. The initiative would provide funding for five to seven neighborhoods with grants that primarily fund the preservation, rehabilitation and transformation of these communities. The budget proposal provides for $250 million for the Choice Neighborhoods initiative.

Community Development Fund
The Community Development Fund provides assistance to state and local governments, as well as other entities for economic and community development activities. There are several programs that fall under the Community Development Fund which provides funding for the Community Development Block Grant (CDBG) and other programs listed below. 

HOME Investment Partnership Program
The HOME Investment Partnership Program provides federal block grants to states and localities that communities use to fund a wide range of activities that build, buy, and/or rehabilitate affordable housing for rent or homeownership or provide direct rental assistance to low-income people. The President’s FY2012 budget proposes almost $1.7 billion in funding a decrease of about $157 million from 2010.

Housing Trust Fund
The Housing Trust Fund would provide grants to states to increase and preserve the supply of affordable rental housing and homeownership opportunities for extremely low-income families. The President’s FY2012 budget proposes $1 billion for this program to be distributed by formula to states to target resources to areas with substantial needs.

Homeless Assistance Grants
The FY2012 Budget requests about $2.7 billion for a wide range of activities to assist homeless persons and prevent future homelessness.

Home Ownership Preservation Equity Fund Program Account (HOPE for Homeowners)
The HOPE for Homeowners program was created by the Housing and Economic Recovery Act of 2008 to help homeowners in risk of default and foreclosure. The program assists these homeowners with refinancing their current mortgage loans into a new mortgage insured by the FHA. The President’s budget requests $2 million for this program which is an increase of $1 million from 2010.

Human Services 

Child Support Enforcement
The budget requests a total $3.8 billion for Child Support Enforcement, which is a decrease of over $550 million. The ability of states to use federal child support incentive funds to match federal child support dollars was not included in this request.  Rather, there is a temporary increase to performance-based incentive payments to states, which focuses on efficiency and program outcomes.

Temporary Assistance to Needy Families (TANF)
The proposal continues level funding for the Temporary Assistance to Needy Families (TANF) entitlement to the states.  The budget does not set forth a legislation reauthorization proposal.  The document expresses a willingness to discuss a variety of proposals and approaches.

TANF Contingency Fund and Supplemental Grants
There is a proposed $612 million for Contingency Fund expenditures for FY 2012.  The regular TANF Contingency Fund for FY 2011 has already been expended. The President proposes $319 million in Supplemental Grants, which go to 17 states with high poverty/high population growth.  There is a shortfall in the current CR for TANF Supplemental Grants for FY 2011.  In this budget proposal, there are resources included to fund the FY 2011 Supplemental Grants for Population increases. 

Low Income Home Energy Assistance (LIHEAP)
The President’s proposal includes $2.57 billion for the Low Income Home Energy Assistance Program (LIHEAP), which is what the program was funded at in FY 2008.  There is $1.98 billion in base grants and $590 million in contingency funds.  This proposal does not include the mandatory funding trigger which was part of prior years’ budgets.  The decrease is nearly half what was enacted in FY 2010, which totaled $5.1 billion.  This decrease is based on forecasts from the Department of Energy predicting more moderate energy prices in winter 2011-2012. 

Community Services  Block Grant (CSBG)
The budget proposal requests a significant cut in funding for the Community Services Block Grant (CSBG) as well as an overhaul as to how the grants are administered.  The proposed FY 2012 level of $350 million is half of what was requested and authorized in FY 2010.  The proposal directs the grants to be administered on a competitive basis with the highest performing Community Action Agencies receiving the funds.  It is unclear what the relationship will be for states to the programs under the competitive grants.



  • Provides a $449.6 million increase over the 2010 enacted level to total request of $900 million for the Land and Water Conservation Fund. 
  • The total discre­tionary funding requested for the Abandoned Mine Reclamation Fund is $27.4 million, a decrease of $8.1 million below the 2010 Enacted/2011 CR level.


Workforce Innovation Fund (WIF)
The President proposes a new Workforce Innovation Fund, a competitive program jointly administered with Department of Education, to incentivize States and local areas to create innovative solutions for job training and workforce development. The President’s Budget proposes $380 million for FY2012 through $65 million in department programming funds, and the remainder comprised from allocations set aside from other DOL workforce development initiatives.

Adult Employment and Training Activities (WIA Adult Program)
The Adult Employment and Training Services provides formula grants to States to target disadvantaged  low-income, low-skilled, and unemployed and underemployed adults to assist in job training and skills acquisition. Such programs are primarily delivered through One-Stop Career Centers. The President’s Budget proposes $861 million for FY2012, a slight decrease over the $862 million 2010 enacted level. Out of this FY2012 amount, $69 million is set aside for WIF.

Dislocated Worker Employment and Training Activities
WIA Title I program offers services to displaced workers and employers, individuals dislocated due to mass layoffs or plant closings, formerly self-employed workers and homemakers no longer supported by income of another family member. In 2011 these programs served 1.2 million Americans. The President’s Budget proposes $1.40 billion for FY2012, a decrease from the $1.41 billion 2010 enacted level. Out of this FY2012 amount, $94 million is set aside for WIF.

Youth Activities (WIA Youth Program)
WIA Youth Program distributes formula funding to states and local areas to target low-income, disadvantaged young people to provide them with the skills necessary for employment and higher education. The President’s Budget proposes $924 million for FY2012, a $2 million decrease from the enacted 2010 level. Out of this FY2012 amount, $94 million is set aside for WIF.

Pension Benefit Guaranty Corporation (PBGC)
PBGC is a government owned corporation intended to preserve defined benefit pension plans and mandatory insurance programs. The President’s Budget proposes $7.3 billion for FY2012, an increase over the $6.6 billion 2010 enacted level.


  • Byrne/JAG - level funding of $519 million, but $30 million is for bulletproof vests and $2 million for state and Local Anti-Terrorism Training
  • Adam Walsh Act funding - increased to $30 million from $11 million in FY '10 and $0 in the continuing resolution
  • Second Chance Act - $100 million 

Tax Provisions

  • Fully pay for the alternative minimum tax (AMT) for three years through offsets in itemized deductions for high-income earners.
  • Calls on Congress to work with the administration on corporate tax reform.
  • Extends earned income tax credit for larger families and the American opportunity tax credit
  • Enhances and makes permanent the research and experimentation tax credit.
  • Taxes qualified dividends and net long-term capital gains at a 20 percent rate for upper-income taxpayers.


Surface Transportation Reauthorization
Requests $556 billion for a six-year surface transportation reauthorization proposal. The proposal is designed to meet four broad goals: strengthening infrastructure, spurring innovation, ensuring safety, and reforming government and exercising responsibility.

This includes $50 billion “Up-Front” for highways, transit and rail programs. The “Up-Front” funds includes:

  • $450 million for Transportation and Infrastructure Finance and Innovation (TIFIA) to help meet growing demand for highway credit assistance to States;
  • $1 billion for New Starts for investment in new transit options to reduce congestion, decrease travel times, improve mobility, reduce energy consumption, and create more livable communities;
  • $2 billion for National Infrastructure Investments (NII), a grant program, similar to TIGER, that would provide grants to State and local governments and transit agencies for capital investments including roads, highways, public transportation facilities, freight and passenger rail, and port infrastructure.

National Infrastructure Bank (I-Bank)
Requests $5 billion—$30 billion over six years—to establish an Infrastructure Bank to finance projects of national or regional significance. The I-Bank would provide grants and loans for funding multi-modal projects for highway, transit, rail, aviation, including ports and maritime initiatives. [No discrete TIGER grants.]

Transportation Leadership Awards
Requests $32 billion for a “race-to-the-top” style incentive program to encourage reforms in the planning, building and management of transportation systems. The competitive grant program would reward states and regions that implement strategies that strengthen collaboration across various levels of government, focus on performance and outcomes, and encourage the development of multimodal transportation systems.

Transportation Trust Fund
Expands the current Highway Trust Fund and incorporate several General Fund programs into a new trust fund with four accounts—highways, transit, high-speed passenger rail, and National Infrastructure Bank.

High-Speed Rail
Requests $53 billion over six years to continue construction of a national high-speed rail network that includes core express, regional and emerging rail corridors and funding for Amtrak.


  • Reform and extend Build America Bonds.

  • As part of the Wireless Innovation and Infrastructure Initiative (WI3) the President’s Budget calls for $5 billion for the FCC to expand next generation of wireless broadband to 98 percent of the country. These funds will assist in providing wireless broadband to rural America and will help support FCC’s efforts to restructure the Universal Service Fund to support broadband deployment.