Understanding the Federal Budget and Implications for Adult Education

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  • - Ryan budget cuts 1.4T in discretionary spending over 10 years, Medicaid, Medicare, adult education, TANF spending, etc.
  • http://www.calculatedriskblog.com/2013/01/thoughts-on-budget-deficit.html Thisgraph shows revenue and outlays as a percent of GDP. Clearly, in fiscal 2012, the government had BOTH a revenue and spending problem. Both revenue and spending have been impacted by the great recession, and are slowly recovering.There was also a structural deficit starting in fiscal 2002, and even during the housing boom, revenue was below outlays.  So the recent low level revenue was due to both cyclical and structural reasons.In fiscal 2013, revenue will increase due to the payroll tax increase, an increase in the tax rate on high income earners, and an improving economy. Spending will probably decrease as a percent of GDP due to some spending cuts and an improving economy.The sooner deficits are cut, the less debt that will be accumulated—but also the greater the drag on economic activity over the next few years. Indeed, several provisions of current law that are bringing down the deficit will weaken output and employment this year.
  • - This is just to show that the proportion of the budget that many of the budget proposals are addressing is a small fraction of our total federal spending. While Congress and the President have made previous statements about addressing entitlement issues, there is essentially a political firewall around that set of issues.
  • Budget Control Act (August 2011)Sequestration was created as part of the Budget Control Act of 2011, which ended that year's showdown over raising the federal debt ceiling. BCA called for the creation of a deficit reduction plan developed by a supercommittee. Upon the failure of that committee, the Budget Control Act calls for $1.2 trillion in automatic spending cuts over the next decade, divided equally between defense and "non-defense discretionary" programs.Policymakers crafted the Act with the expectation that these indiscriminate cuts would be so devastating that lawmakers would be forced to come to the table before they would take effect and hammer out another, longer-term deal to responsibly get the government's fiscal house in order.The BCA also created budget “caps” which we’ll talk about in the next slide. These are yearly caps for 10 years over which the approrpriations process cannot appropriate funds.Supercommittee failure (November 2011)To no one’s surprise, the supercommittee was unable to come to an agreeement on a deficit reduction plan. This kicked in sequestration, which was set to occur January 1, 2013.ATRA (January 2013)Delayed sequestration to March 1, 2013.Raised taxes on high-income earners.Did not extend the payroll tax cut.Lowered the sequestration target figure for FY13 (fewer months out of the year)SequestrationSEE: http://www.cbpp.org/cms/index.cfm?fa=view&id=3910
  • The Budget Control Act (BCA) of 2011 imposed caps on discretionary programs that will reduce their funding by more than $1 trillion over the ten years from 2012 through 2021, relative to the Congressional Budget Office (CBO) baseline from 2010.  It also established a Joint Select Committee on Deficit Reduction to propose legislation reducing deficits by another $1.2 trillion over that period, and established a backup “sequestration” procedure to increase the incentive on the Joint Committee to reach a compromise.  Because the Joint Committee failed to achieve its goal, sequestration — a form of automatic cuts that apply largely across the board — is now scheduled to occur starting in January 2013 and to cover the period through 2021.The sooner deficits are cut, the less debt that will be accumulated—but also the greater the drag on economic activity over the next few years. Indeed, several provisions of current law that are bringing down the deficit will weaken output and employment this year.
  • FY13: $564m in basic grants to states for PY14 since adult education is advance-funded.
  • - For discretionary programs, the supercommittee sequestration works very differently after 2013. 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.  Policymakers then determine how to live within those reduced caps.  Essentially, after 2013, there are no automatic, proportional cuts of affected discretionary programs; instead, the Appropriations Committees (and then, more broadly, the President and Congress) decide how to fund discretionary defense and non-defense programs within the newly reduced funding caps.Specifically, in each year from 2014 through 2021:The $109.3 billion sequestration amount is divided evenly between defense and non-defense:  $54.7 billion for each category.The defense sequestration comes almost entirely from discretionary defense funding, with only a tiny amount from mandatory defense funding.For the non-defense sequestration, the first step is to calculate the 2 percent cut in Medicare payments to providers and health insurance plans.  Because Medicare costs are projected to rise from 2013 through 2021, the dollar amount saved by this 2 percent cut will increase each year, from $11.1 billion in 2013 (see Table 4) to $11.6 billion in 2014 and ultimately to $18.2 billion in 2021 (see Table 6).[19]In each year from 2014 through 2021, the remaining amount of the $54.7 billion in annual non-defense cuts will be applied proportionally to:  a) the statutory cap on overall NDD funding, and b) other non-exempt mandatory programs.[20]   Because Medicare will account for a growing share of the $54.7 billion annual non-defense cut — 21 percent in 2014, rising to 33 percent in 2021 — other non-defense programs will absorb a falling share of the cut, as Table 6 shows.
  • Understanding the Federal Budget and Implications for Adult Education

    1. 1. Understanding the Federal Budgetand its Implications for AdultEducation (and What You Can DoAbout It!) March 25, 2013 Marcie Foster, CLASP Jackie Taylor, National Coalition for Literacy
    2. 2. The Real World: Budget Process• Congress has a multi-year budget process: – Agencies present budgets to OMB – President’s Budget – Budget resolution (determines the size of the pie) • 302(a) allocations – Appropriations (determines the size of the slices) • 12 subcommittees-302(b) • Labor-HHS includes adult education spending• Most of recent high-stakes deadlines (e.g. ―fiscal cliff‖) are political fabrications, not part of the budget process.
    3. 3. What’s the big deal anyways?
    4. 4. Federal Spending
    5. 5. Mandatory v. Discretionary• Mandatory spending • Discretionary spending occurs automatically must be ―appropriated‖ once authorized. each year.• Like your rent or • Like buying clothing, mortgage, health groceries, or a insurance, phone bill. computer.• Includes Social • Includes adult Security, Medicare, education, job training, Medicaid, SNAP. health research, military spending, disaster relief. Debt Ceiling limits total government borrowing
    6. 6. How Did We Get Here? Sequestration (March 2013) American • Has a multi- Taxpayer year Supercommittee Relief Act (Jan impact, with Failure 2013) greater hits inBudget Control (November subsequent • DelayedAct (August 2011) sequestration years.2011) • Set off $1.2T in to March 1, • Will cut• Increased debt cuts over the 2013. approx. 5 % limit. next 10 years • Raised taxes across-the- (“sequestration”) on high- board in• Established into motion to income discretionary budget caps. occur January 1, earners. spending.• Reinforced by supercommittee 2013. • Did not extend and the payroll tax sequestration. cut.
    7. 7. All Budget Options are Painful for Non- Defense Discretionary Spending$700 Budget Authority in Billions$650$600$550$500$450$400 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 CBO Baseline BCA Caps Sequestration Murray FY 14 Ryan FY 14 COMMITTEEE FOR EDUCATION FUNDING
    8. 8. Non-Defense Discretionary Spending Would be Cut to the Bone Source: Bipartisan Policy Center
    9. 9. Adult Education Has Already Taken Budget Hits – Enrollment Declines Following $750 3.00 Enrollment by Program Year (in millions)(in millions of constant dollars) $700 2.50 $650 $600 2.00 Funding $550 1.50 $500 $450 1.00 $400 0.50 $350 $300 0.00 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Federal WIA Title II Adult Education Funding One-Time Adjustment made for underpayment between 2003 - 2008 Enrollment
    10. 10. Taking a Balanced Approach to Deficit Reduction• Programs cuts have borne the brunt of deficit reduction. For every $1 in revenue increases, we’ve had $2.50 in spending cuts.• Need to ensure a balance of spending cuts and revenues in a comprehensive plan.• More spending cuts on the horizon – continuing resolution (FY13) with sequestration.
    11. 11. More “Deadlines” Approaching… House and Senate Budget Resolutions (April 15-- “no Fiscal YearSequestration budget, no 2014 Begins (March 1) pay”) (October 1) FY13 Debt Continuing Ceiling Resolution Reached (March 27) (May 18)
    12. 12. Sequestration:Congress’ “Best” Idea • Sequestration was designed to bring both Democrats and Republicans to the negotiating table to agree to unpalatable spending cuts and tax increases in order to reduce the deficit
    13. 13. Sequestration – March 1, 2013• Most members of Congress agree that sequestration is a bad way to reduce the deficit BUT cuts will likely remain (5% on non-defense discretionary)• Some discussions about administrative flexibility implementing the sequester.• Programs in future years (FY14 and beyond) are not exempt—everything is on the table.
    14. 14. More “Deadlines” Approaching… House and Senate Budget Resolutions (April 15-- “no Fiscal YearSequestration budget, no 2014 Begins (March 1) pay”) (October 1) FY13 Debt Continuing Ceiling Resolution Reached (March 27) (May 18)
    15. 15. Continuing Resolution (FY13) –March 27, 2013• FY13 CR will fund the government for the remainder of the fiscal year (until Sep. 30).• CR will be the implementation of the sequester (5% from non-defense discretionary).
    16. 16. More “Deadlines” Approaching… House and Senate Budget Resolutions (April 15-- “no Fiscal YearSequestration budget, no 2014 Begins (March 1) pay”) (October 1) FY13 Debt Continuing Ceiling Resolution Reached (March 27) (May 18)
    17. 17. Budget (FY14) – April 15• Ryan Budget (House) – Reaches balances budget in 10 years. – No revenues, only spending cuts.• Murray Budget (Senate) – Takes a balanced approach to deficit reduction (revenues and spending cuts). – Preserves spending in critical areas (education, job training, infrastructure).• President’s Budget (April 8) – Will likely seek a balanced ratio of 1:1 revenues to spending cuts.
    18. 18. More “Deadlines” Approaching… House and Senate Budget Resolutions (April 15-- “no Fiscal YearSequestration budget, no 2014 Begins (March 1) pay”) (October 1) FY13 Debt Continuing Ceiling Resolution Reached (March 27) (May 18)
    19. 19. Debt Ceiling – May 18• Unlikely to result in political stalemate due to reasonable increase in January 2013.
    20. 20. The Bottom Line• Basic grants to states in July 2013 will be impacted unless action is taken to reverse the sequester or introduce administrative flexibility.• FY14 and subsequent years will pose even more significant challenges if the sequester remains in effect – there are no firewalls between defense and non-defense.• The best-case scenario (Senate FY14 budget proposal) will still put extreme downward pressure on funding for adult education.
    21. 21. Keep in touch! Marcie Fostermwmfoster@clasp.org Jackie Taylor jackie@jataylor.net

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