The Hidden Cuts in Domestic Appropriations
OMB Data Reveal Deep Funding Cuts After 2007

PDF of full report (20pp.)

By Richard Kogan, Isaac Shapiro and Katherine Richards

February 9, 2006

Related Areas of Research

Under the Administration’s budget, funding for domestic discretionary programs would be cut by $183 billion over the next five years, relative to OMB’s own budget baseline (i.e., relative to the 2006 funding levels adjusted for inflation).  By 2011, the last year covered by the budget, funding for these programs would be cut an average of 13 percent.

While discretionary funding proposals for 2007 have received some attention in initial discussions of the budget, the discretionary cuts proposed in broad program areas for years after 2007 have received virtually no attention.  This is because the budget documents provided by the Office of Management and Budget — in a departure from standard practice — failed to provide explicit information about the funding for discretionary programs after 2007.  Yet this information is critical to understanding the budget’s priorities.  For example, many programs that would be cut only slightly in 2007 (or even expanded) would face significant cuts in 2008-2011.

Fortunately, the missing information can be assembled from Administration computer runs that were not widely distributed and a series of tables scattered throughout the OMB budget documents.  Using this information, the Center has prepared two analyses of the proposed funding for discretionary programs in 2008-2011.  This analysis examines the funding levels that the Administration is proposing for each of the next five years for the major groupings of programs, such as all programs serving veterans.  A companion analysis will examine the funding levels that the Admnistration is proposing for each year for specific programs.  As Figure 1 indicates, the Administration is proposing substantial cuts in a wide range of domestic discretionary program areas.

This analysis examines the proposed program cuts (or increases) by broad program area and by subcategories of programs.  (The broad program areas are known as budget “functions,” while the subcategories are known as “subfunctions.”)  The analysis also discusses an argument some Administration officials may make that funding levels for years beyond 2007 should not be taken seriously, even though these figures represent the Administration’s own choices.  The analysis concludes by showing that domestic discretionary spending has played only a small role in the reemergence of large budget deficits and that the cuts the Administration is now proposing in domestic discretionary programs will not, in fact, be used to reduce the deficit, but in effect will be used to pay for a fraction of the cost of further tax cuts.

An appendix explains how this information was assembled from the various sources of Administration data.

Cuts by Major Program Area

The President’s budget proposes to reduce funding for domestic “discretionary” (i.e., annually appropriated) programs in each of the next five years, relative to the existing 2006 funding levels adjusted for inflation (i.e., relative to the OMB baseline).  This coming year, fiscal 2007, the funding cuts would total $16 billion and average 4.1 percent.  The reductions then would grow deeper in each succeeding year, climbing to $57 billion, or 13 percent, by 2011.  (See Figure 2.)

By 2011, most major program areas would be hit sharply.

  • Veterans’ programs would be cut a total of $10.3 billion over the next five years, with the cuts reaching 13 percent in 2011.  These programs primarily provide health care to veterans.

  • Energy programs would receive one of the largest percentage reductions of any area of domestic discretionary programs; they would be cut 29 percent in 2011.  Funding for these programs would be cut a total of $4.4 billion over five years.  The programs in this area include research on alternatives to oil, energy conservation efforts, and emergency energy preparedness programs.

Table 1:
President's 2007 Budget Proposes $183 Billion in Funding Reductions In Domestic Discretionary Programs

(President's Proposal Relative to the Current Services Baseline, By Budget Category)

 

Change in 2011

Five Year Change: 2007-2011

Budget Function

In Billions of Dollars

Percent Change

In Billions of Dollars

General Science, Space, and Technology

+$3.4

+12.2%

+$11.0

Energy

-$1.4

-28.5%

-$4.4

Natural Resources and Environment

-$7.8

-21.9%

-$28.1

Agriculture

-$1.3

-18.3%

-$4.4

Commerce

-$2.1

-53.6%

-$1.7

Transportation

-$3.9

-13.8%

-$15.3

Community and Regional Development

-$0.8

-5.9%

-$2.2

Education, Training, Employment, and Social Services

-$14.6

-16.6%

-$52.7

Health (NIH, CDC, and other, not Medicare or Medicaid)

-$7.3

-12.7%

-$24.2

Income Security (Housing, WIC, child care, and other)

-$7.1

-12.9%

-$23.6

Veterans Benefits Services (primarily medical care)

-$4.9

-12.8%

-$10.3

Administration of Justice

-$3.4

-7.2%

-$10.4

General Government (White House, Congress, IRS)

-$3.5

-17.3%

-$9.9

 

 

 

 

Total Domestic Discretionary (All Discretionary Except Defense and International Affairs)*

-$56.8

-13.0%

-$183.1

Notes:

* The functional figures do not add to the total because not every function is shown in this table.  There are 18 functions in total, all of which are shown in the accompanying spreadsheet posted on the Center’s website.

Given the information that is available, we are unable to exclude homeland security funding from the budget function figures.  The commerce, transportation, community and regional development, and justice functions receive significant homeland security funding.  If proposed increases in funding for homeland security were excluded from these functions, the cuts in these functions generally would be larger than shown here.  The total cut in funding for domestic discretionary programs would be larger as well.

  • Environmental and natural resources programs would be sliced by 22 percent, or nearly one-fourth, by 2011, with the cuts totaling $28.1 billion over five years.  Falling within this group are programs that protect the environment and the funding that supports the national parks.

  • Education and workforce development programs would be cut by 17 percent in 2011, and by $52.7 billion over five years.  These programs include K-12 education, higher education, community college funding, job training, and other such programs.

  • Health programs would be reduced by 13 percent in 2011, and by $21.9 billion over five years.  Programs in this area include medical research at the National Institutes of Health, community health centers, and HIV/AIDS treatment funds.

  • Similarly, income security programs would be cut by 13 percent in 2011, and by a total of $23.6 billion over five years.  A wide range of programs is contained within this overall category, such as low-income housing assistance programs, child care assistance, low-income home energy assistance, and nutrition programs that serve low-income mothers and children and low-income elderly people.

The proposed reductions (or increases) for each budget function can be found in a spreadsheet that is posted on the Center’s website.  The appendix explains how to read this spreadsheet.

 

Few Subcategories of Programs Would Be Immune from Cuts

The OMB budget materials provide information not only on the proposed funding changes for each broad budget “function,” but also for each budget “subfunction.”  These data show that few domestic program areas would be immune from cuts.

  • For example, within the education function, programs that provide support for K-12 education and vocational education would be sliced 13 percent by 2011 and by a total of $18.1 billion over five years, while higher education programs would be cut 20 percent in 2011 and by $15.8 billion over five years.  (Total education funding would be sliced nearly $36 billion over five years.)  Programs related to K-12 education include funding associated with the No Child Left Behind Act, as well as other education programs.

  • Within the health function, health care services (which include community health centers, HIV/AIDS treatment, and Indian health services) would be reduced by 11 percent; health care research and training (which includes the National Institutes of Health) would be cut by 14 percent; and consumer and occupational health and safety (which includes, for example, funding for the Occupational Safety and Health Administration, Mine Safety, and the Consumer Product Safety Commission) would be cut by 15 percent.

Table 2
Proposed Funding for Selected Budget Sub-Categories
(President's Proposal Relative to the Baseline)

 

Change in 2011

Five Year Change: 2007-2011

Budget Sub-Category

In Billions of Dollars

Percent
Change

In Billions of Dollars

Elementary, secondary, and vocational education

-$5.6

-13.5%

-$18.1

Higher education

-$4.0

-19.8%

-$15.8

Energy conservation

-$0.2

-27.4%

-$1.0

Health care services

-$2.2

-10.5%

-$7.1

Health care research and training

-$4.5

-13.8%

-$15.5

Consumer and occupational health and safety

-$0.6

-15.4%

-$1.6

Hospital and medical care for veterans

-$4.5

-12.9%

-$9.3

Conservation and land management

-$2.2

-20.9%

-$7.9

Recreational resources

-$0.6

-22.5%

-$2.2

  • Hospital and medical care for veterans would be hit hard, with the cuts amounting to $4.5 billion in 2011 alone (a 13 percent reduction) and to $9.3 billion over five years.  The budget proposals for these programs illustrate why the Administration has sought to highlight its proposals for discretionary programs only for 2007, and to bury information on its proposals for the subsequent years.  The information in the OMB budget books shows that funding for medical care for veterans would rise by $1.9 billion in 2007.  Largely hidden from view is the budget information showing that the Administration proposes that funding for veterans medical care then be cut sharply after 2007 — and be pushed $700 million below the baseline in 2008, $2 billion below the baseline in 2009, and, as noted, $4.5 billion below the baseline by 2011.  Given the rising cost of medical care — and especially the large number of wounded servicemen returning from Iraq and Afghanistan — the reductions after 2007 are almost certainly not tenable.

  • Within the natural resources and environment function, conservation and land management programs would be cut by one-fifth, or 21 percent by 2011, while recreational resource programs (such as national parks) and pollution control and abatement programs both would be cut 22 percent.

The funding path for every budget subfunction can be found in the spreadsheet mentioned earlier that is posted on the Center’s website.  As noted above, the appendix at the end of this analysis explains how to read the spreadsheet.

Despite Potential Administration Claims, the Post-2007 Figures Have Significance 

In the past, some Administration officials have argued that the Administration’s figures for discretionary program areas for 2008-2011 are not meaningful and should be disregarded.  It is possible that Administration officials will make this argument again, claiming that these figures were derived “mechanically.”  Such claims are not credible.

  • The President’s budget proposes to set a binding legal cap on the total level of discretionary funding for each of the next five years, enforced by automatic across-the-board funding cuts if those levels would otherwise be exceeded.  The President’s budget also proposes that these caps be set at exactly the aggregate levels of discretionary funding that the budget proposes for each of the next five years.  In other words, the budget proposes that the overall level of discretionary program cuts that the President is recommending be mandated by law.  Under this approach, if Congress rejected a cut in one program area, it would have to compensate by making still deeper cuts in another area.

  • Moreover, the Administration has been emphasizing that the deficit would fall year by year under its budget.  That would happen in years through 2010 in part because the budget presumes that funding for domestic discretionary programs will drop substantially, as this analysis indicates.  In other words, the Administration’s claims about declining deficits for the next few years rest on the discretionary program cuts in its budget being real cuts, not just hypothetical ones.

  • Finally, if the post-2007 figures actually had been derived mechanically, then all functions and subfunctions would be shown to have the same percentage reduction.  Yet that is not what the President’s budget shows.  To the contrary, it is clear that the Administration made choices in setting its post-2007 discretionary funding levels.  For instance, the subfunction that contains the Census (subfunction 376, Other Advancement of Commerce) shows a very large increase in 2010 — when the next decennial census is due — followed by a big drop to more normal levels in 2011.  In addition, the function for Space and Science, which includes NASA and the National Science Foundation, shows increases in every year, while nearly all other functions and subfunctions show cuts.

Domestic Discretionary Programs Targeted For Cuts Despite Their Small Contribution to the Return to Deficits

Domestic discretionary programs have contributed little to the recent return to deficits.

  • Congressional Budget Office estimates show that the cost of legislation enacted since the start of 2001 equals $645 billion in fiscal year 2006 alone, considerably more than the entire budget deficit.  The CBO data show that increases in domestic discretionary programs outside homeland security represent only 11 percent of the cost of this legislation (and are this large a percentage only because of the inclusion of substantial fiscal year 2006 expenditures related to hurricane Katrina; this percentage is expected to fall to 7 percent in 2007).

  • By contrast, tax cuts constitute 40 percent of the cost of legislation that has increased the deficit from 2001 to 2006.  Increases in defense, international, and homeland security costs represent another 36 percent of the cost of the deficit-increasing legislation enacted since the start of 2001.  (The remaining 12 percent is due to legislation increasing entitlement costs, including the prescription drug benefit).

A final point deserves emphasis.  Under the President’s budget, reductions in funding for domestic discretionary programs would not be part of an overall strategy to reduce the deficit.  To be sure, as this analysis details, domestic discretionary programs would be reduced significantly.  There would be cuts to some entitlement programs as well.  But these reductions would be offset in part by increases in defense and homeland security.  More important, the budget’s $285 billion in proposed tax cuts over the next five years would swamp the domestic program cuts. 

If Congress put the budget on automatic pilot, enacting neither the President’s program policies nor his tax cuts, the deficit would be lower in every year than it would be under the President’s budget.  (The budget data showing this were also partly concealed by the Administration, in another departure from standard practice.)  Overall, the President’s proposals would increase deficits by a total of $192 billion over the next five years, as compared to what deficits would be if current policies were kept in place and the President’s policies were not pursued.

Appendix: How this Information was Compiled and Where Further Information Can Be Found

Other than in the first year, 2007, the funding cuts discussed in this analysis are not visible in the President’s budget.  The budget lists its proposed entitlement cuts by program for each year through 2011, as it does with its proposed tax cuts.  (These are shown in budget summary tables 6 and 7 on pages 318 through 329 of the Budget.)  In contrast, the cuts or increases in discretionary programs are shown only for 2007.  (See summary tables 2, 3, and 4 on pages 314-316 of the Budget.)  To find the Administration’s proposed funding levels for the different discretionary program areas for years after 2007, one must go to other OMB budget data that were not made broadly available.

It is standard in federal budgeting to ascertain whether funding is being cut or increased by comparing the funding levels being proposed to the existing funding levels, adjusted for inflation (i.e., to the budget “baseline”).  In examining an administration’s budget, one simply compares the administration’s proposed funding level for a given year with the baseline level for that year to see whether the proposed funding level is above or below the baseline.  OMB’s baseline for discretionary funding by function and subfunction is publicly available in Table 25-12 of the Analytical Perspectives, one of the OMB budget volumes issued on February 6.

To measure the President’s proposed funding decreases or increases, we need to find the discretionary funding levels that the President is proposing for the various discretionary program areas and to compare these levels with the budget baseline levels.  We start with the total funding (or “Budget Authority”) that the President’s budget proposes for each budget function and subfunction for each of the next five years.  These data (which include a single figure for each function and subfunction for the funding level for mandatory and discretionary programs combined for each year) are publicly available in Table 5.1 of the Historical Tables, another of the OMB budget volumes.  These data constitute the first page of a spreadsheet posted on the Center website.

We then identify the funding level that the Administration is proposing for the mandatory programs in each function and subfunction for each of these next five years.  These data were provided by OMB in the form of a computer run and made available to Congress on February 6, and are included here as the second page of the spreadsheet.  With these data, we can identify the Administration’s proposed discretionary funding level for each year for each function and subfunction.  The third page of our spreadsheet is simply the total funding level for each year for each function and subfunction minus the mandatory funding level for each year for each function and subfunction — in other words, the level of discretionary funding that the President is proposing for each function and subfunction for each year through 2011.  The fourth page of our spreadsheet then shows the budget baseline for each year for each discretionary function and subfunction, as discussed above. 

The function and subfunction data described in this analysis can be found in the last two pages of our spreadsheet.  The fifth page compares the President’s proposed funding levels by function and subfunction with the baseline levels to show the dollar cuts or increases being proposed, by function and subfunction, for each of the next five years.  The sixth and final page of the spreadsheet shows the percentage decrease or increase for each function and subfunction, relative to the baseline projection, for each year.

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