Overview of the President's FY 2014 Budget

Graphics of a budgetThe president’s FY 2014 budget proposal released on April 10, 2013, totals $3.77 trillion. It would reduce the federal deficit by $1.8 trillion over the next 10 years through revenue enhancements and spending reductions. The president typically releases his budget the first week of February but was delayed because of the fiscal uncertainty at the beginning of the year. Both the House and Senate already have offered and approved budget proposals for FY 2014, although an agreement between the two chambers remains a challenging proposition.

The news for states varies in the 2,460-page budget proposal. Additional funding for infrastructure development and early childhood education are emphasized. The president’s proposal continues the administration’s push to cap or limit the authority of state and local governments to issue tax-exempt bonds. Although the last eight years of the sequestration cuts would be eliminated, the president’s budget calls for deeper reductions than the spending caps instituted in the Budget Control Act.

A Federal Funds Information for States (FFIS) report highlights discretionary and mandatory program funding differences between FY 2013 and the president's FY 2014 proposal.

Deficit Reduction | Tax Reform

The president’s plan to reduce the nation’s long-term debt is similar to other budget or stimulus proposals the administration has released in recent years. Targeted revenue increases to high-income earners, tax credits for small businesses and stimulus-like funding increases for infrastructure investments have been introduced by the president in the past. The FY 2014 plan would decrease the deficit by $1.8 trillion over the next ten years, although a majority of these savings goes towards the elimination of sequestration. Details of the proposal include:

  • $580 billion in tax reform by both broadening the tax base and reducing tax benefits. This contains capping the value of itemized deductions and other tax preferences, including the tax-exempt status of state and local governments bonds, at 20 percent for high-income families. The president also recommends millionaires pay taxes on at least 30 percent of their income after charitable deductions, known as the Buffett Rule.
  • $400 billion in health savings. This includes new physician payment models, reducing bad debts in Medicare coverage, aligning Medicare payment policies with Medicaid for low-income beneficiaries, and higher premiums for high-income earners, among others.
  • $200 billion from other mandatory program savings, including reductions to farm subsidies and federal retirement accounts.
  • $200 billion in discretionary savings split between defense and non-defense spending. These reductions would be in addition to the 10-year discretionary caps.
  • $230 billion from changing the inflation measurement to a chained Consumer Price Index (CPI).
  • $200 billion in reduced interest payments on the debt.

Other Highlights

  • Provides $50 billion for infrastructure investment. Included is $40 billion for “Fix it First” projects, which targets maintenance on highways, bridges, transit systems and airports.
  • Creates a national infrastructure bank to provide private and public capital support to infrastructure projects.
  • Establishes American Fast Forward (AFF) bonds that would be used for projects that are currently financed with tax-exempt private activity bonds.
  • Tax relief for two years for employers in states that are indebted to the federal unemployment insurance trust fund.
  • Provides one-time outlay of $200 million for “Race to the Top” performance-based funding for state governments to implement strategy to cut energy waste and modernize the electricity grid.
  • Provides $40 billion over five years for high-speed rail and other passenger rail programs.
  • Expands the Transportation Infrastructure Finance and Innovation Act (TIFIA) loan program and the Transportation Investment Generating Economic Recovery (TIGER) grant programs.
  • Establishes “Preschool for All” initiative with states, providing low-to-moderate income four-year old children quality preschool. The federal funding would be provided by raising the federal tax on cigarettes from $1.01 to $1.95.
  • $1 billion for a new “Race to the Top” College Affordability and Completion competition.  Awards would go to help states improve student outcomes such as graduation rates without raising tuition.
  • $265 million in new funding for a comprehensive Science, Technology, Engineering and Math (STEM) innovation proposal that includes STEM innovation networks, STEM teacher pathways, and a new STEM Master Teacher Corps.
  • Establishes two new programs, similar to the Neighborhood Stabilization Program, to help rehabilitate and or/demolish damaged or vacant properties.
  • Continues implementation of the Affordable Care Act and Dodd-Frank.
  • Raises federal minimum wage from $7.25 to $9 by the end of 2015.