Fasten Your Seatbelts, We’re in for a Bumpy Ride

1. Fasten Your Seatbelts, We’re in for a Bumpy Ride NASBO Spring Meeting April 26, 2013 Santa Ana Pueblo, NM Federal Funds Information for States

2. Where Are We Now?

3. Let’s Start at the Very Beginning

4. Focus on FY 2014

5. Divergent FY 2014 Budget Proposals

6. Health President: Medicare Part D rebates; Medicare provider cuts; means-testing Medicare premiums; Medicare cost sharing; federal employee health programs House: Repeal coverage provisions of ACA; convert Medicaid and CHIP to block grants; Medicare Part D tort and means-testing; Medicare premium support proposal would kick in later Senate: Nonspecific cuts focused on providers rather than beneficiaries, and focused on Medicare

7. Other Mandatory President: Reduce tax fraud; reduce farm subsidies; increase federal employee retirement contributions; reduce fraud and abuse; reform PBGC House: Increase retirement contributions; reduce farm subsidies; block grant SNAP; reform PBGC; wind down Fannie Mae and Freddie Mac; reform energy subsidies and reduce land purchases Senate: Reform agriculture programs and PBGC

8. Discretionary President: Reduce discretionary beyond BCA levels beginning in FY 2017 House: Reduce transportation and other discretionary spending Senate: No specific recommendations

9. Chained CPI President: Adopt chained CPI for most parts of federal budget and tax code, excluding means-tested programs. Savings are split -$130b on spending side, -$100b on revenue side House: No provision but possibly amenable to president’s proposal Senate: No provision

10. Revenues President: Limit value of certain exclusions and deductions (including tax-exempt bonds) to 28% tax bracket; “Buffett Rule”; cigarette tax House: Deficit-neutral tax reform (limiting tax expenditures to allow lower rates) Senate: No specifics beyond limiting tax expenditures and targeting “the wealthiest Americans and big corporations”

11. Sequester President: Repeal sequester but implement cuts to discretionary spending beyond those mandated by BCA caps, beginning in FY 2017 House: Retain sequester but reallocate cuts from defense to nondefense Senate: Repeal sequester but implement cuts to discretionary spending beyond those mandated by BCA, beginning in FY 2015

12. War and Sandy President: Assume a reduction from FY 2013 levels, while CBO baseline assumes continuation at inflation-adjusted levels House: Same as president, with more modest drawdown assumptions Senate: Same as president, with more ambitious drawdown assumptions

13. Jobs President: “Fix it First”; competitive transportation program; infrastructurebank; America Fast Forward Bonds; expand TIFIA; high-speed rail; payroll tax credit for employers; Department of Energy Race to the Top House: No provisions Senate: Infrastructure repair; fix dams; dredge ports; infrastructure bank and technology in schools

14. Themes in President’s Budget • Implement new competitive grants • Preschool development • “First in the World” • High school redesign • “Race to the Top” energy grants • Add competitive elements to existing formula grants • LIHEAP energy burden reduction • Child Care Development Block Grant • Consolidate separate funding streams • ESEA reauthorization • National Preparedness Grant Program

15. Open Questions of Import Will the House and Senate adopt a concurrent budget resolution? Will each chamber proceed based on its individual budget resolution? How will the gap be bridged? Will we end up back in Sequesterland? The “action-forcing” event: debt ceiling Will be reached soon, with enough wiggle room to get through July.