Federal Policy Agenda

1. National Legislation 2013: Effect on Local GovernmentAlabama County Government InstituteJune 6, 2013

2. Federal Policy Agenda Snapshot of Pending County Issues • White House/OMB and Federal Agency Regulatory Review • Affordable Care Act and Impact on Counties • FY2014 Federal Appropriations Aid to State & Local Govts. • Immigration Reform and County Impact • PILT and Secure Rural Schools Funding and Extension • Marketplace Fairness Act (Existing Remote/Online Sales Taxes) • Multi-Year Farm Bill Reauthorization • Workforce Investment Act (WIA) Reauthorization • MAP-21 Highway and Transit Reauthorization

3. Timeline Key Issues and Timelines • Sequestration in Effect: Across-the-Board Cuts (Began March 1, 2013) • FY2013 Federal Appropriations: Process Completed for FY2013 • President's FY2014 Budget: Release Delayed Until April 10, 2013 • FY2014 Appropriations Process: Congress has Started • Tax and Entitlement Reform: Congressional Hearings have Started • Federal Debt Ceiling Deal: Debate Delayed to Fall 2013

4. Federal Budget Picture Unemployment Rate Continues Downward Trend Source: Bureau of Labor Statistics, April 2013

5. Federal Budget Picture Budget Deficit Has Hit Record Highs in Past Five Years Source: Congressional Budget Office, May 2013

6. Federal Budget Picture GAO Projections for State and Local Governments Fiscal sustainability presents a national challenge shared by all levels of government. According to the GAO, state and local sectors face persistent and long-term fiscal pressures. Absent policy changes, there is a growing gap between receipts and expenditures in future years

7. Political Context Public Skeptical on National Outlooks Source: NBC/WSJ Pol, April 2013

8. Political Context Congressional Approval Hovers Near Three-Decade Low Source: Gallup.com, March 2013

9. Political Context President Obama’s approval ratings have remained solid—he has not yet recorded a steady approval rating under 40 percent, something that every president since Nixon has done

10. Political Context White House Agenda Distracted by Scandals • IRS Issues • Benghazi Attack • DOJ Secretly Acquiring AP Reporter Phone Records • This triple play is likely to lead to months of hearings and may delay White House momentum on any of its other agenda items, including reaching some kind of grand bargain on deficit reduction or jobs bills

11. Federal Policy Agenda Triple Threat of Issues Facing Counties • Entitlement Reform • Medicaid cuts and cost shifts to states and counties • Tax Reform • Elimination/reforms to tax-exempt municipal bonds • Elimination of state and local property, income and • sales tax deductions on federal income tax forms • Sequestrationand Annual Appropriations • Federal aid cuts to state and local governments

12. Federal Budget Picture In the Long Term, CBO Projects Over $25 Trillion in Entitlements Expenditures Source: Congressional Budget Office, 2013

13. Entitlements Entitlements Are Still on the Menu Health care spending has slowed BUT entitlement spending is still driver of deficit and debt Medicaid Medicare and Social Security are 100% federal Medicaid financing and administration is federal, state and county Counties are required to provide health care for low income, uninsured or underinsured residents in 32 states There are 964 county hospitals and 647 county nursing homes serving Medicaid beneficiaries in communities nationwide Additionally, counties put up part of the non-federal match for Medicaid in 22 states. House FY2014 budget changes Medicaid to block grant The President’s FY2014 budget basically leaves Medicaid alone

14. Entitlements: Risk?

15. Entitlements: Risk?

16. Affordable Care Act

17. Affordable Care Act

18. Affordable Care Act

19. Municipal Bonds • Proposals to Alter the Tax-Exempt Status of Municipal Bonds Continue to Remain a Threat to County Government

20. Municipal Bonds MULTIPLE MOVING PARTS: THE SENATE • Major Coalition Letter to Senate Leaders: NACo/NLC/USCM led a major coalition to Senate leaders urging them to protect municipal bonds as they consider the FY2014 Budget Resolution. Almost 60 major groups have signed on • Sen. Begich (D-AK) Letter to President Obama: Sen. Begichled a letter in the Senate urging the Administration to protect the tax-exempt status of municipal bonds in the ongoing debt and deficit negotiations • Senate Finance Committee Working on Tax Reform: The Senate Finance Committee, led by Chairman Max Baucus (D-MT) and Ranking Member Orrin Hatch (R-UT), are meeting regularly to discuss options for tax reform

21. Municipal Bonds • MULTIPLE MOVING PARTS: THE HOUSE • House Ways and Means Committee Established Working Groups to Tackle Tax Reform: 11 working groups gathered information and data on topics related to tax reform and have submitted to the Joint Committee on Taxation who have compiled information for report to Ways and Means Committee • ​House Ways and Means Committee Hearing on Tax Reform: Hearing held March 19, “Tax Reform and Tax Provisions Affecting State and Local Government” • Reps. Terry and Neal Lead House Resolution to Support Muni Bonds: H.Res.112, introduced by Reps. Lee Terry (R-NE) and Richard Neal (D-MA), celebrates the importance of municipal bonds; co-sponsors needed (61) • Rep. Dutch Ruppersberger (D-MD) Leading Letter to House Leadership to Support Municipal Bonds

22. Marketplace Fairness Act Senate Votes in Favor of Internet Sales Tax Bill Source: National Journal

23. Marketplace Fairness Act Moving Forward • Successful Senate Vote (69 – 27) • Moves to House Judiciary Committee • House Leadership not against moving, but different version than Senate • Current House bill has 65 cosponsors; nearly half are Republican

24. Farm Bill Reauthorization Farm Bill Timeline Source: National Journal

25. Farm Bill Reauthorization Challenges Moving Forward • Senate is currently considering this week on floor; House leadership has promised to give the bill floor time by summer • If the House and the Senate stick to this schedule, there will be enough time for the two chambers to negotiate a compromise and pass a final bill by September 30, when the current Farm bill extension expires • Continued major differences over Supplemental Nutrition Assistance Program (SNAP)

26. Immigration Ongoing Immigration Debate

27. FY2013 CR FY2013 Continuing Resolution (P.L. 113-6) • Signed into law March 26, 2013 • Ordinarily, a CR pro-rates funding for federal agencies and programs at the prior year’s level for a short period, but this CR locks in the $85 billion in sequestration or the automatic, across-the-board cuts • It also contains some spending adjustments that give certain federal agencies (i.e. DOD, USDA, VA, Commerce, Homeland Security and Justice) flexibility to implement the across-the-board sequester cuts

28. Sequestration Sequestration: FY2014 through FY2021 • For discretionary programs funded through the annual appropriations process, sequestration works very differently after FY2013 • Instead of Congress enacting appropriations bills at levels that do not breach the existing discretionary caps and the President then ordering an across-the-board sequestration of the funding provided by those bills, the law requires that the sequestration of discretionary programs be implemented up front through reductions in the defense and non-defense discretionary caps themselves • House and Senate Appropriations Committees will determine how to fund each agency and program within those reduced caps Source: Center on Budget and Policy Priorities

29. President’s FY2014 Budget Noteworthy Changes • Eliminates Justice Department’s State Criminal Alien Assistance Program, funded at $216 million in FY2012 and $220 million in FY2013 • Eliminates DHS State Homeland Security Grants, funded at $294 million in FY2012 and $285 million in FY2013; Would be replaced with new consolidated National Preparedness Grant Program • Cuts HUD’s Community Development Block Grants (CDBG) by $280 million, down from $2.94 billion in FY2012 and $2.80 billion in FY2013 • Cuts HUD’s HOME Program to $945 million, from $1 billion in FY2012 and $950 million in FY2013 • Cuts HHS Community Service Block Grants to $350 million, down from $677 million in FY2012 and $642 million in FY2013 • Increases DHS Second Chance Act Programs and Research to $119 million, from $58 million in FY2013 • Increases HHS Head Start program to $9.62 billion, from $8.01 billion in FY2013 • Increases DOT Essential Air Service to $246 million, from $183 million in FY2013

30. President’s FY2014 Budget Payment in Lieu of Taxes Program (PILT) • President’s 2014 budget proposes to extend mandatory funding for PILT at $410 million, an increase of $8.8 million from FY2013 • The President’s FY2014 budget also proposes an independent public evaluation of PILT to review the program, in both concept and practice, with a goal of developing options to put the program on a sustainable long-term funding path

31. President’s FY2014 Budget Secure Rural Schools & Community Self Determination Act • President proposed a five-year reauthorization of the Secure Rural Schools Act (starting in FY2013), with funding through mandatory appropriations • FY2014 payment is proposed at $278 million, a reduction of $68 million from FY2012 levels • The Forest Service has recently proclaimed that funds already distributed under the most recent extension of the Secure Rural Schools and Community Self-Determination Act (SRS) or payments based on revenue generated in FY2012 are subject to the FY2013 sequester, and the agency will be requesting repayment of $17.9 million in SRS and 25% fund payments that have already been disbursed to States • The National Governors Association, NACo and more than 50 members of Congress have questioned OMB and USDA over the legal authority of applying the Budget Control Act (BCA) and American Taxpayer Relief Act (ATRA) sequestration cuts to FY2012 SRS payments

32. Budget and Appropriations FY2014 Budget and Appropriations • The House caps discretionary spending at $967 billion; leaves sequester intact • The Senate caps discretionary spending at $1.059 trillion; repeals sequester • The not so small problem moving forward is that the two budgets are $91 billion dollars apart compromise is unlikely • Without an agreement, it is unclear how many of the annual bills will move to the floor; given the major differences, continuing resolutions are likely • House Appropriations Chairman Hal Rodgers (R-KY) has begun to move FY2014 bills through subcommittee: Milcon-VA and HS have passed full committee • Senate Appropriations Chairman Barbara Mikulski (D-MD) aims to move the FY2014 spending bills through the committee before August recess. This week, she plans to meet with subcommittee chairmen to discuss spending amounts in each of their respective bills (these are known as 302(b) allocations)

33. Federal Budget Picture Budget Proposals Highlight Partisan Divide Source: National Journal

34. Legislative Analysis

35. DON’T MISS NACo’s 2013 ANNUAL CONFERENCE! Network with your peers and explore new innovations, trends and emerging practices in county government! REGISTRATION NOW OPEN AT WWW.NACO.ORG

36. About NACo • The National Association of Counties (NACo) assists America's counties in pursuing excellence in public service by advancing sound public policies, promoting peer learning and accountability, fostering intergovernmental and public-private collaboration, and providing value-added services to save counties and taxpayers money • Founded in 1935, NACo provides the elected and appointed leaders from the nation's 3,069 counties with the knowledge, skills, and tools necessary to provide fiscally responsible, quality-driven, and results-oriented policies and services for healthy, vibrant, safe, and fiscally resilient counties

37. Contact Us! Questions? For questions or more information, feel free to contact us Matthew Chase, NACo Executive Director mchase@naco.org Deborah Cox: Legislative Director dcox@naco.org or 202.942.4286 Paul Beddoe: Health pbeddoe@naco.org or 202.942.4234 Michael Belarmino: Finance & Intergovernmental Affairs mbelarmino@naco.org or 202.942.4254 Daria Daniel: Community and Economic Development ddaniel@naco.org or 202.942.4212 Bob Fogel: Transportation bfogel@naco.org or 202.942.4217 Deseree Gardner: Labor and Employment dgardner@naco.org 202.942.4204 Erik Johnston : Agriculture and Rural Affairs ejohnston@naco.org or 202.942.4230 Ryan Yates: Public Lands ryates@naco.org or 202.942.4207 Julie Ufner: Environment, Energy & Land Use jufner@naco.org or 202.942.4269 Yejin Jang: Telecommunications and Technology yjang@naco.org or 202.942.4239 NACo was named one of nine remarkable associations in the United States after a four-year study conducted by the American Society of Association Executives and The Center for Association Leadership because of its commitment to members and purpose

38. 25 Massachusetts Avenue, N.W. ▲ Suite 500Washington, D.C. 20001202.393.6226www.naco.org NACo was named one of nine remarkable associations in the United States after a four-year study conducted by the American Society of Association Executives and The Center for Association Leadership because of its commitment to members and purpose.