Overview of the President's FY 2013 Budget

The president’s FY 2013 budget unveiled on Feb. 13, 2012, weighs in at $3.8 trillion, offers a $3 trillion deficit reduction outline comprised of spending reductions and revenue enhancements, and prioritizes funding for state-federal education and transportation programs. This unveiling commences the FY 2013 federal budget process. By the end of March, House Republicans intend to move a FY 2013 budget resolution likely to mirror one they passed last year. The Senate Democratic leader recently announced that there will not be a floor vote on a FY 2013 budget resolution because spending targets enacted in last year’s Budget Control Act will guide appropriations decisions.

The news for states is mixed throughout the 2,571 page budget document. A small but significant handful of Medicaid reductions are recommended. Competitive grants, a hallmark of the current administration, are expanded into higher education. Stimulus-like funding for education, transportation, unemployment benefits and reduced payroll taxes are highlighted. Across-the-board cuts in domestic and defense discretionary spending are averted if the proposed deficit reduction plan is adopted.


    The president’s FY 2013 budget requests:

  • A 3-percent reduction ($700 million) in discretionary spending from the FY 2012 enacted budget -- to $23 billion. 
  • An end to direct payments, saving $22.7 billion through 2022.
  • A reduction of $32 billion over the next decade in overall farm subsidies--including crop insurance and conservation.


The president’s FY 2013 budget requests a five percent increase--to $8 billion--in discretionary funding .

Economic Development Administration (EDA)

The president’s FY 2013 budget requests $182 million, a reduction of $38 milliion from FY 2012.

International Trade Administration (ITA)

The president’s FY 2013 budget requests $517 million, an increase of $61 million from FY 2012.

Wireless Innovation and Infrastructure Initiative

The Wireless Innovation and Infrastructure Initiative provides $7 billion for building the public safety network, and includes allocation of the “D Block” spectrum within the 700 MHz band for public safety use. 

The Wireless Innovation Fund is created to provide $3 billion of spectrum receipts to help develop and promote cutting-edge wireless technologies.


The president's FY 2013 budget:

  • Recommends two more additional rounds of base realignment and closure (BRAC) and to establish an independent commission that will provide an objective review and analysis of these recommendations.
  • Provides a 1.7 percent increase to basic pay in calendar year 2013.
  • Reforms TRICARE that would realize savings of $12.9 billion in discretionary funding and $4.7 billion in mandatory savings over five years.


The president’s FY 2013 budget:

  • Sustains federal funding for Title I at $14.5 billion, and for special education grants at $11.6 billion, important streams of federal funding for states.
  • Continues the competitive grants aimed at education reforms that have been the administration's priority. The budget provides $850 million for Race to the Top and $100 million for Promise Neighborhoods, and $150 million for i3 (Investing in Innovation). The Race to the Top funding will be available to states, districts and for Early Learning Challenge Grants to improve child care and prepare children for success in school. 
  • Includes a package of initiatives to keep college affordable:  1) makes the American Opportunity Tax Credit permanent; 2) suspends an increase in student interest rates; and 3) funds Pell grants for 10 million students and low-cost college education loans for 12 million borrowers. The budget also proposes two new competitive grants:  one for College Affordability and Completion and the other called "First in the World".
  • Invests $80 million in the Effective Teachers and Leaders state grants to expand promising and effective models of preparing science, technology, engineering and mathematics (STEM) teachers.
  • Includes $8 billion to support job training through state and community college partnerships with businesses. This is a joint initiative between the Departments of Education and Labor.


The president’s FY 2013 budget:

  • Requests a $70.7 million increase for Weatherization Assistance grants over FY 2012, from $65 million to $135.7 million.
  • Decreases funding for the State Energy Program by $1 million, from $50 million in FY 2012 to $49 million in FY 2013.
  • Proposes $5.65 billion for environmental management programs, a 1.1 percent reduction in funding from FY 2012, which was $5.71 billion.
  • Requests $7.6 billion for Weapons Activities, an increase of $363 million or 5 percent from FY 2012, which was $7.2 billion


The president’s FY 2013 budget:

  • Proposes $1.2 billion for the Clean Water State Revolving Fund (SRF), a 20 percent reduction from FY 2012.
    • The State Revolving Fund will also support green infrastructure, since at least 20 percent of the Clean Water fund must be used by the states for projects to address green infrastructure, water or energy efficiency improvements, or other environmentally innovative activities. For FY 2013, states must use at least 10 percent of the Drinking Water State Revolving Funds on projects that address green infrastructure, water or energy efficiency improvements, or other environmentally innovative activities.
  • Proposes $850 million for the Safe Drinking Water State Revolving Fund, a 7.7 percent reduction from FY 2012. 
  • Reduces Superfund by $37.4 million, from $1.20 billion in FY 2012 to $1.18 billion in FY 2013.   


Provider Taxes:  Many states impose taxes on health care providers to help finance the state share of Medicaid program costs. The administration proposes to phase-down the Medicaid provider tax threshold from the current level of 6 percent in 2014, to 4.5 percent in 2015, 4 percent in 2016 and 3.5 percent in 2017 and beyond. Federal savings: $21.8 billion over 10 years.

Blended Matching Rate for Medicaid and CHIP:  Under current law, there are different federal matching rates for Medicaid (FMAP) and CHIP (eFMAP), with the CHIP program receiving an enhanced matching rate above the Medicaid rate. In addition, the Patient Protection and Affordable Care Act (PPACA) provides for a special enhanced rate for individuals who become newly eligible for Medicaid under the Medicaid expansion in the act in 2014. Under current law, the federal matching rate for each state is adjusted annually, based on changes in per capita income using a three-year rolling average calculation. There is no special adjustment during recessions, natural disasters or other occurrences that may increase state Medicaid enrollment. The administration proposes to replace the existing matching rate structure with a single matching rate for each state that would automatically increase if a recession forces enrollment and state costs to rise. Federal savings:  $17.8 billion over 10 years.

Rebase Disproportionate Share Hospital (DSH) Allotments in 2021:  The PPACA reduced state DSH allotments by $18.1 billion through 2020 to reflect the reduced need assumed as a result of the increased coverage provided in the act. The proposal would compute 2021 state DSH allotments based on states' actual 2020 DSH allotments, better aligning future Medicaid supplemental payments to hospitals with reduced levels of uncompensated care.  Federal savings:  $8.25 billion over 10 years.

Homeland Security 

Creats a National Preparedness Grant Program (NPGP), which streamlines 16 existing preparedness grant programs, and would provides states:  the funding directly, more time to spend the money, and greater flexibility in how the money is spent. The NPGP includes (but is not limited to):
  • Operation Stonegarden.
  • Driver’s License Security (REAL ID).
  • Citizens Corps Grant Program.
  • Port Security Grants.

The proposal also requests:

  • $675 million in  Firefighter Assistance Grants to remain available until Sept. 30, 2013.
  • $143 million for the  E-verify system to help employers maintain a legal workforce.

Human Services 

Children and Family Support

Child Support Enforcement. The budget requests a total $3.9 billion for Child Support Enforcement, which is a decrease of $180 million from FY 2012. Restoring the ability of states to use federal child support incentive funds to match federal child support dollars was not included in this request. This budget request includes a proposed $2.2 billion initiative to modernize the Child Support system and to promote responsible fatherhood. There is proposed funding incentive to states to pass through child support payments to families; there are no details as to the amount of this funding or whether states must reimburse the federal government or their share. This is expected to result in savings in the Supplemental Nutrition Assistance Program (SNAP). There appears to be a new child support mandate related to foster care. There is a proposed $10 million in grants to states to facilitate non-custodial parent access and visitation with their children.

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 full legislative reauthorization proposal. The budget proposal does, however,  include making the TANF Supplemental Grants a permanent part of TANF. The proposal includes $612 million for the contingency fund, which is the same as FY 2012, and a proposal with no details to restructure the fund.  Funding for the $319 million in TANF Supplemental Grants would be offset by funds from the TANF of the $612 million contingency fund. 

Low Income Home Energy assistance (LIHEAP). The president’s proposal includes $3.0 billion for the Low Income Home Energy Assistance Program (LIHEAP). There is $2.8 billion in base grants and $200 million in contingency funds. This proposal is down $452 million from those appropriated for FY 2012 levels.  

Child Welfare. The budget request includes a total of $7.2 billion for Foster Care and Permanency. There is $90 million proposed for the Guardian Assistance Program (GAP), which is an increase of $10 million from FY 2012. The budget proposes increasing the Adoption Assistance program by $42 million to $2.5 billion. The Chafee Foster Care Independence Program would be level funded at $140 million. Included in the proposal is a new pregnancy prevention program for foster care youth. This program would be funded through Title V funds that states do not draw down. Finally, there is a proposed mandate that would require child support payments made on behalf of children in foster care be used in “the best interest of the child.”  There are no details on this proposed mandate.

Child Care.  Funding for the child care and development fund is $6 billion for FY2013 under the president’s request, which is an increase of $825 million from FY 2012. This includes $3.4 billion for the child care entitlement, which is an increase of $500 million, and $2.6 billion in the block grant, which is an increase of $325 million. The latter would be earmarked to improve quality. There appears to be a forthcoming administration incentive on quality and quality rating systems. Further information about maintenance of effort and matching requirements is not included in the budget documents.

Community Services Block Grant (CSBG). Similar to the president’s FY 2012 proposal, the FY 2013 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 2013 level of $350 million is about half of what was requested and authorized in FY 2012. 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.

Social Services Block Grant (SSBG).  The budget requests that the Social Services Block Grant (SSBG) be level funded at just under $1.8 billion.  SSBG provides flexible grants to states for uses ranging from child care to residential treatment.

Nutrition and Food Programs

Food Stamps/Supplemental Nutrition assistance Program (SNAP). The president requests a one-year extension of the Recovery Act (P.L.111-5) state option that allows childless adults to receive SNAP/food stamps benefits. The proposal also restores the SNAP/food stamp benefit cuts included as part of the Child Nutrition reauthorization (P.L.111-296).  In the budget, the sunset date for the SNAP/food stamp benefit would revert back to March 31, 2014.  This would restore the cut made in P.L.111-296, Child Nutrition reauthorization. The SNAP estimate assumes that SSI for some elderly and disabled refugees is restored resulting in some increased usage and mandatory pass through of child support to families resulting in some SNAP savings.

Child Nutrition. The budget proposes funds to implement the Healthy and Hunger-Free Kids Act of 2010 (P.L.111-296), with a particular focus on school meal improvements and expanding breakfast and child care feeding. The budget proposal anticipates implementation of P.L. 111-296, which increases access to the National School Lunch and Breakfast programs and adjust the food offered in these programs. There is $19.7 million in anticipated costs for participation and increased food standards to implement P.L.111-296.  This is a $1.5 billion increase from FY 2012.

Special Supplemental Program for Women, Infants and Children (WIC). The president’s request includes a proposal of $7.04 billion for the Special Supplemental Program for Women, Infants, and Children (WIC), an increase of $423 million from the 2012 level.

Refugee and Immigration Programs

Refugee Supplemental Security Income. The budget proposal includes $41 million to provide elderly and disabled refugees Supplemental Security Income (SSI) in FY 2013 and $42 million in FY 2014, shifting the cost burden off the states. The proposal would allow eligible refugees stay on SSI through 2013 and 2014 as well as restore SNAP benefits. 

Office of Refugee Resettlement (HHS).  The budget requests a total of $805 million for refugee-related programs, which include assisting newly arriving refugees with transitional assistance, language and vocational training. It also includes funds for unaccompanied alien children, and services to assist victims of human trafficking and victims of torture. Included in the proposal is $5 million for training and coordinating systems that are most likely to come in contact with youth domestic sex trafficked victims.

SCAAP (State Criminal Alien Assistance Program). The president requests $70 million for the State Criminal Alien Assistance Program (SCAAP), which is a 71 percent reduction from the FY 2012 level of $240 million . 


The president’s FY2012 budget request for the Department of Labor is $11.973 billion in discretionary funds, a 5 percent reduction from FY2012 levels.

Adult Employment & Training Activities (WIA Adult): The president’s budget requests $769.5 million for FY2013, a slight decrease from $770.8 million estimated for FY2012.

Youth Activities (WIA Youth Program):  The president’s budget requests $824.4 million for FY2013, level funding from the FY2012 amount.

Dislocated Worker Employment and Training Activities: The president’s budget proposes $1.230 billion for FY2013, a slight decrease from the $1.232 billion FY2012 level.

Workforce Innovation Fund (WIF): The president’s budget requests $125 million for WIF, with $100 million paid from DOL, and $25 million provided by the Department of Education. This is an increase over the FY2012 level of $49.9 million provided by DOL.

State Paid Leave Fund: $5 million. The president has proposed establishing a new State Paid Leave Fund to assist states that seek to establish their own paid leave programs. Such funds would be utilized for technical assistance, research/analysis and implementation. Currently, only California and New Jersey have established similar programs. The president has requested $5 million in FY2013.

Pension Benefit Guaranty Corporation (PBGC): The president’s budget requests $7.131 billion for FY2013, an increase over the $6.508 billion amount from FY2012.

Tax Provisions

The president's FY 2013  budget proposes to:

  • Simplify tax code and lower tax rates.
  • Allow the expiration of 2001/2003/2010 tax cuts for single taxpayers making over $200,000 or married couples making over $250,000.
  • Require taxpayers making more thanr $1 million to pay no less than 30 percent of their income taxes.
  • Return of the estate tax exemption and rates to 2009 levels.
  • Reduce the value of itemized deductions and other tax preferences, including interest on tax-exempt bonds, to 28 percent for families with incomes over $250,000.
  • Revive Build America Bonds (BABs) at a 30 percent subsidy rate for two years and 28 percent afterwards.


The president's FY 2013 budget:

  • Requests $476 billion for a six-year surface transportation reauthorization, including $47 billion over six years ($2.7 billion in 2013) to develop high-speed passenger rail corridors and improve intercity passenger rail service.
  • Consolidates over 55 programs into five.
  • Requests $50 billion in immediate investments in 2012.  In particular:
    • $28 billion to the Federal Highway Administration to provide for highway restoration and passenger freight rail transportation projects.
    • $3 billion to the Federal Aviation Administration (FAA) to provide for airport development grants and to conduct research and to develop and improve the FAA navigation facilities to advance the Next Generation Air Transportation System.
    • $6 billion to the Federal Railroad Administration (FRA) to improve the country’s intercity passenger rail network and to Amtrak for repair and upgrades.
    • $9 billion to the Federal Transit Administration to Transit Formula Grants (formerly Formula Bus Grants) for maintenance and repair of buses and to modernize existing bus guideway systems
    • $4 billion to the Office of the Secretary of Transportation to provide for credit assistance and award grants for surface transportation projects of all modes.
  • Reduces funding for airport grants by over $900 million. Federal support would focus on smaller airports. At the same time, the budget would allow larger airports to increase non-federal passenger facility charges, thereby giving larger airports greater flexibility to generate their own revenue.
  • Pays for these investments (in addition to the revenues deposited into the Highway Trust Fund) from savings generated by a reduction in overseas military operations.


Universal Service Fund.  The president’s budget calls for $5 billion to the Federal Communications Commission to overhaul the Universal Service Fund (USF),  to reduce the cost of broadband development and adoption.

Establish a National Infrastructure Bank. The president has called for the creation of an independent, nonpartisan National Infrastructure Bank (NIB), which would offer broad eligibility and merit-based selection for large-scale ($100 million minimum) transportation, water and energy infrastructure projects. The NIB would issue loans and loan guarantees to eligible projects. Loans issued by the NIB could be extended up to 35 years, giving the NIB the ability to be a “patient” partner side-by-side with state, local and private co-investors. To maximize leverage from federal investments, the NIB would finance no more than 50 percent of the total costs of any project.