A SPECIAL REPORT:
SEQUESTRATION AND THE FEDERAL BUDGET
March 7, 2013
About the Report
In a continuing effort to provide information
and resources to its membership, the
National Association of Regional
Councils (NARC) put together this special
report on critical areas of, and issues
within, the federal budget. This document
provides a brief historical perspective of
“how we got here” and offers resources for
a future path for regional planning in the
federal budget.
According to the Congressional Budget
The above graphic depicts the results from a recent Gallup public opinion poll, highlighting
Office (CBO), “the United States is facing
what Americans are saying and thinking about sequester.
significant and fundamental budgetary Source: http://www.gallup.com/poll/160760/americans-reactions-sequester-include-bad-disaster.aspx
challenges.” Recent and ongoing activities
in Washington, including the historic March 1, 2013, sequester enactment, reinforce CBO’s conclusion. The country
seems to be at the precipice for economic downturn with every federal budget decision or lack thereof. There are
questions to answer when piecing together the federal budget puzzle: Where are we? How did we get here? Where are
we going? What should NARC members do? Let’s investigate.
“Congress and the Administration did not act in time to
stop the mandatory cuts under the sequester. NARC
will continue work to assess the fiscal impacts to our
members as well as work with the Administration on
any possible way to lessen the impact of these cuts
or minimize them if possible. I hope that in the coming
weeks Congress will act to repeal the sequester
and employ common sense strategies and serious
negotiations that give us fiscal certainty.”
NARC President David F. Shafer, ClerkTreasurer, Town of Munster, Indiana; Board
Member, Northwestern Indiana Regional
Planning Commission, Portage, Indiana
“The cuts come at a fragile time in our nation’s
economic recovery. Families will bear the brunt of the
impact as job losses mount and spending pulls back.
The cuts that are going into effect are blunt instruments
broad sweeping, rather than being strategic and
targeted to still allow for smart investments in our
nation’s cities and towns. The effects of sequestration
will test the resolve and creativity, and most certainly
push this nation’s cities, residents, and businesses to
the point of another recession.”
Mayor Marie Lopez Rogers, President, National
League of Cities; Board Chair, Maricopa
Association of Governments, Phoenix, Arizona;
and Board Member, National Association of
Regional Councils
Where are we?
2013 started with our nation dangling from an economic “fiscal cliff” – a combination of expiring tax cuts, spending
reductions via the sequester and an ongoing debt ceiling debate. We initially slowed our fall with the passage of the
American Taxpayer Relief Act and through increasing the debt ceiling until May 19, 2013; however with the enactment
of sequestration the nation began to fall into economic uncertainty again. Much of our current local and regional
fiscal insecurity stems from the 2011 Budget Control Act, which reduces discretionary spending by nearly $1.5 trillion
over the next decade (Center on Budget and Policy Priorities 2012). Sequester’s cuts on top of already reduced
annual budget caps, with an ever increasing national debt, puts into focus a picture of economic stress, reduced
services at all levels of government and potential increases in unemployment. Further fiscal complications arise from
political deadlock that prevents movement on important legislative processes that appropriate government funding or
authorize core local and regional programs.
National Association of Regional Councils
How did we get here?
The federal budget process – a
complex system that takes into
account fiscal policy choices and
national priorities – turned into
continued series of delays. Each
year Congress and the White
House undergo a budget exercise
that hasn’t been successfully
completed since 1994. Here’s what
the process should look like:
1. President submits budget
request to Congress
The above graphic illustrates how the annual budget process should work.
(1st Monday of every
Source: http://nationalpriorities.org/media/uploads/federal_budget_101/Figure4.3color.jpg
February).
2. Congress creates, reconciles and passes a budget resolution, which establishes the funding priorities and
parameters, including limits on the appropriations process.
3. The appropriations committees and subcommittees establish, reconcile and pass the levels of discretionary
funding for each program and policy area within the federal government’s purview.
4. The appropriations bills are reconciled and approved by Congress and then the President to become law
before the October 1st start of the new fiscal year.
Here’s what it has really looked like since 1994:
1. Delay
2. Delay
3. Delay
4. Continuing Resolutions/Omnibus efforts
The two opposing pictures of what’s supposed to happen and what actually happened begins to illustrate part of the
problem for how we got into the fiscal trouble that Washington is trying to correct through budget cuts and other measures.
So how did we get to the point where we were sitting on a mountain of debt and saw only cutting discretionary
programs as a solution? The nation got here through almost a decade of continued and high levels of spending with
reduced revenue. In 2011, the government took in $2.3 trillion in revenue, but spent $3.6 trillion. Almost every year
since 1969, Congress spent more money than it collected (CBO 2011). This historical cycle of spending more than
we make in revenue coupled with various policy decisions started the deep deficit and ultimately the debt conundrum.
Our national debt is currently at over $16.6 trillion.
In 2001 there was a tax cut of $2.8 trillion.
From 2001 to 2011 discretionary spending
increased by $3 trillion; the largest share
of this was defense spending for Iraq
and Afghanistan, and homeland security
upgrades. $1.4 billion from the Medicare
prescription-drug program, the Trouble Asset
Relief Program (TARP) bank bailout and the
stimulus package added billions more to the
debt. The housing bubble and subsequent
collapse also took a toll on the revenue
side of the equation (CBO 2011). During
this same time period, spending for core
local government and regional discretionary
programs, like housing, water, aging,
workforce training, etc., declined or held
even. Discretionary spending is “everything
else” in the federal budget not related to
mandatory entitlement programs like Social
Security or payments of interest on the debt.
Source: http://politicalcalculations.blogspot.com/2012/06/president-obamas-unsustainable-fiscal.html#.UTjeLhz5p8E
A Special Report: Sequestration and the Federal Budget: National Association of Regional Councils
This is critical for NARC members to understand; click HERE
or visit http://narc.org/wp-content/uploads/aureport2012.pdf to
access a NARC - American University joint report, which details
some of these funding gaps.
The 2011 Budget Control Act, the current sequestration’s
birthplace, will cut discretionary spending in fiscal year 2013
by $85 billion split evenly between defense and non-defense
programs. These across-the-board and “indiscriminate” cuts are
expected to reduce funding from nine to 13 percent in real terms
over the next seven months (White House Office of Management
and Budget 2013). A bigger threat to national fiscal sustainability
is not discretionary spending (31 percent of the federal budget),
but mandatory spending (62 percent of the federal budget), i.e.
Social Security, Medicare, and Medicaid. Their expected growth
will continue to disproportionately affect federal spending.
Source: http://www.marktaw.com/culture_and_media/politics/USA_debt_2009.html
Where are things going?
While Congress and the President are
likely to ink an agreement for the FY13
continuing resolution (CR) to fund the
government through September 30,
2013, problems still remain –
• Implementing sequester (in
2013 and beyond);
• FY13 and FY14 appropriations;
• Increasing the debt ceiling; and,
• Conducting authorizations
Implementing sequester – This is
history repeating itself. Back in 1985,
the Gramm-Rudman-Hollings Act was
instituted to get the deficit and debt
under control. It didn’t work. It amounted
to accounting tricks and budgetary shifts.
Sequester was never to be the primary
tool to address deficit and debt issues.
In fact, sequester was never supposed Source: http://www.fixthedebt.org/blog/a-timeline-of-impending-fiscal-speed-bumps#.UTjfphz5p8E
to happen at all, and now sets a new level for federal spending – at (roughly) $100 billion less per year until 2021.
Congress may use these new lower budget reduction numbers as a base to enact further cuts. According to former
Hill staffer and federal budget expert Scott Lilly, “[t]he sequester won’t reduce the deficit by anything close to the $85
billion that’s being advertised. What’s more, it may not reduce the deficit at all” (Center for American Progress 2013). It
is not the “Grand Bargain” President Barack Obama and Congress hoped for. While the sequester accelerates deficit
reduction in the short term, it does so by slashing programs across the board. Several initiatives are underway to repeal
sequester. Click HERE or go to http://narc.org/?p=3273 to access NARC’s sequestration page for more information.
Enacting FY13 and FY14 appropriations – Congress is considering a FY13 CR extension through the remainder
of the fiscal year. It doesn’t address sequester in its entirety, but provides flexibility in reallocation of funding in
defense programs. Click HERE or go to www.narc.org/government-affairs/federal-budget for more information. The
FY14 process has been delayed due to the other fiscal issues mentioned. It is unlikely, building off past precedent,
that Congress will complete the appropriations process on time - the nation will continue operating under a CR.
This creates an environment of uncertainty when planning for and implementing projects. CRs also typically fund
programs at prior fiscal year levels; there are generally no program increases or fixes for inflation or cost of living. An
important thing to note about the FY14 appropriations efforts is that appropriators will be determining sequestration’s
cuts for 2014. It is critical that NARC members are directly involved to highlight vital program funding.
Increasing the debt ceiling – The debt ceiling must be raised in May. As its name would suggest, the debt limit
is simply the maximum amount that the U.S. government can borrow at any given time. The debt limit does not
A Special Report: Sequestration and the Federal Budget: National Association of Regional Councils
authorize new spending; instead, it provides the funding to pay for spending commitments that Congress already
made. The debt ceiling may again be an issue like it was in 2011 if Republicans and Democrats cannot strike a deal
balancing debt-limit increases and spending cuts (About.com).
Conducting authorizations – Congress also failed to reauthorize significant national programs like the Economic
Development Administration (last authorized in 2003); the Older Americans Act (last authorized in 2006); and, the
Workforce Investment Act (last authorized in 1998). These programs survive through appropriations, but going through
an authorization is an important process to make policy changes and to define a commitment to core community and
regional programs. It is unlikely that many, if any, of these programs will get authorized in the 113th Congress – NARC
is committed to getting them done.
ACTION ITEMS: What should NARC members do?
NARC has been and will continue to work on federal budget issues to ensure the voice of regions and their local
governments is considered in all deliberations moving forward. Click HERE or go to www.narc.org/governmentaffairs/federal-budget to access NARC’s Federal Budget webpage, which includes updates on the federal budget
and national debt, as well as resources for NARC members.
All is not lost. NARC members should be in regular contact with their members of Congress to discuss priority
funding, providing local stories and on-the-ground examples of successful programs, specifically highlighting
economic impact, job creation, return on investment, tangential impacts, etc.
Some messages to carry to Congress:
• Immediately pass a fiscal year 2013 CR that provides funding for the government and its programs to
cover the remainder of the federal fiscal year (through September 31, 2013). Another short-term funding
measure would provide a great deal of uncertainty and difficulty when planning and implementing critical
projects at the local and regional levels.
• Repeal sequestration in its entirety. Sequestration’s automatic, across-the-board cuts are blind to
maintaining and supporting programs that make our regions and communities economically viable.
Additionally, several experts have indicated that significant harm to the national interest would occur
unless sequester is addressed by March 31, the end of the second fiscal quarter. As history has proven,
sequester will not provide the desired effects on reducing the national debt, but will inflict hardship on
state and local governments and the communities they represent.
• Complete the FY14 appropriations process on-time and through the proper channels, but without
sequestration.
• Authorize several outstanding core government functions and programs, such as the Economic
Development Administration, the Older Americans Act, Clean Water State Revolving Fund, Drinking
Water State Revolving Fund, Department of Homeland Security and Workforce Investment Act.
NARC is also:
• Working with our partners to research and minimize federal regulatory impact;
• Working to continue to find government efficiencies and opportunities to “cut the cost of doing business”;
• Working to better align federal programs and funding to promote economic competitiveness; and
• Finding new opportunites to attract public and private capital investment in our regions.
See NARC’s policy positions (go to www.narc.org/government-affairs) for specific recommendations.
Contact:
Fred Abousleman, Executive Director, at
202.986.1032 x216 or [email protected].
The National Association of Regional Councils (NARC) serves as the national voice for regionalism by
advocating for regional cooperation as the most effective way to address a variety of community planning
and development opportunities and issues. NARC’s member organizations, including metropolitan planning
organizations, are composted of multiple local governments that work together to serve American communities –
large and small, urban and rural. For additional information, please visit www.NARC.org.
National Association of Regional Councils
777 North Capitol Street NE, Suite 305; Washington, DC 20002
202.986.1032 phone; 202.986.1038 fax; www.NARC.org