October 13, 2006
RECENT
ACTION BY CONGRESS SETS UP LARGER APPROPRIATIONS CUTS IN LAME-DUCK SESSION
by James Horney, Martha Coven, and Matt Fiedler
Summary
As a result of
action Congress took before adjourning for the elections, widespread cuts in
domestic appropriated programs are likely to be made during Congress’ lame-duck
session (or early next year, if Congress fails to complete action on
appropriations for fiscal year 2007 in November or December). Congress shifted
$5.3 billion that Senate appropriators had planned to devote to domestic
programs to the defense and homeland security appropriations bills enacted in
late September. This leaves $5.3 billion less than Senate appropriators had
anticipated for the remaining appropriations bills that Congress must pass when
it returns. (All but $200 million of the $5.3 billion that was shifted was
moved to the defense appropriations bill; the remainder went to the Homeland
Security bill.)
The Senate
Appropriations Committee has approved the nine remaining appropriations bills,
although those bills have not been considered by the full Senate. The amounts
the Committee included in those bills, combined with the amounts that the Senate
had provided for the defense and homeland security bills before the $5.3
billion was shifted to them, exactly equaled the overall amount that the
President’s budget requested for the appropriations bills in fiscal year 2007.
At the
President’s insistence, earlier this year Republican leaders in Congress passed
a requirement that overall appropriations for 2007 not exceed the President’s
request. To meet this requirement, the $5.3 billion just added to the
defense and homeland security bills will have to be cut from the other
appropriations bills, which largely fund domestic programs. If this happens,
Republican moderates who had sought to mitigate the domestic cuts proposed by
the President will come away from the lame-duck session largely empty-handed.
How might
Congress make these $5.3 billion in cuts? In each of the past four years, to
keep within the overall ceiling set for the annual appropriations bills,
Congress instituted an across-the board cut in appropriated programs. If the
$5.3 billion in savings is obtained through a similar across-the-board cut in
the nine remaining appropriations bills, the levels provided in those bills
would be cut by 1.1 percent below what Senate appropriators had proposed.
These
additional reductions would be on top of the cuts the pending domestic
appropriations bills already contain. Moreover, the total cuts made this year
would be in addition to the $12 billion in reductions made in domestic
appropriations bills over the past two years. (Cuts are measured here relative
to the Congressional Budget Office baseline, which equals the prior year’s
appropriation level, adjusted for inflation.)
If such an
across-the-board cut is instituted, many highly regarded programs will face
sizeable reductions. For example, the Senate Appropriations Committee’s bill
for the Departments of Labor, Health and Human Services, and Education already
cuts the Head Start program by $146 million (relative to the program’s 2006
level, adjusted for inflation). A 1.1 percent across-the-board cut would bring
the total cut in Head Start to $221 million.
Similarly,
Education for the Disadvantaged (which includes Title 1) already faces a cut of $320
million under the Senate bill. A 1.1 percent across-the-board cut would bring
the total cut in that program to $479 million.
For the third
straight year, reductions in domestic appropriated programs are likely to be
instituted alongside further tax cuts heavily skewed to the nation’s most
affluent individuals. The Urban Institute-Brookings Institution Tax Policy
Center estimates that the provisions of the principal 2006 tax cut bill, which
was enacted in May and is estimated to cost $70 billion over five years, will be
worth an average of $20 to households in the middle of the income spectrum but
$43,000 to households whose incomes exceed $1 million a year.
Background
Shortly before adjourning at the end of
September, Congress completed action on its first two appropriations bills for
fiscal year 2007, which began October 1. These two bills fund the Department of
Defense and the Department of Homeland Security. The remaining nine
appropriation bills are expected to be taken up when Congress reconvenes for a
“lame duck” session on November 13.
The remaining bills fund a broad range of
government services, including housing, education, veterans’ health care,
environmental protection, and scientific research (as well as defense funding
not provided in the defense appropriations bill for military construction,
military quality of life, and defense nuclear activities). Between now and
November 17, the programs covered by these bills are being temporarily funded
under the terms of a rather austere “continuing resolution,” which generally
sets funding levels for programs at the lower of last year’s level or the
level included in this year’s House-passed appropriation bills.
When Congress reconvenes for a lame-duck session
in November, it will face the question of how much to provide for the programs
covered by the remaining appropriations bills. Ordinarily, the overall
amount available for the appropriations bills is set in the congressional budget
resolution. But this year, the House of Representatives and Senate failed
to agree on a budget resolution.
One of the main reasons Congress failed to reach
agreement on a budget resolution is that moderate Republicans in the House and
Senate made clear they wanted more funding for domestic programs in 2007 than
the President had requested in the budget he submitted to Congress in February,
while the House and Senate Republican leaderships (at the strong urging of
conservative lawmakers and the President) insisted on limiting overall
appropriations to the level the President sought.
The opposition of moderate Republicans in the
House to the overall level of funding for domestic programs that the President
had proposed delayed House adoption of its version of the budget resolution
until May 18, more than a month after the April 15 deadline that the Budget Act
sets for Congress to agree on a budget resolution. House passage of its budget
resolution at that late date was achieved only when House Republican leaders
promised moderate House Republicans that the funding ultimately provided for
domestic programs — and in particular, for programs funded in the appropriations
bill that covers the Departments of Labor, Health and Human Services, and
Education — would exceed the amount the President requested by $7 billion.
House Republican leaders agreed that $4 billion of this increase would be
achieved by shifting funding that the President had requested for defense to the
domestic programs. (They did not specify how the other $3 billion would be
provided.)
The Senate adopted its version of the budget
resolution on March 16, but only after amendments were approved on the Senate
floor effectively increasing the total amount of appropriated funding allowed
for 2007 by $17 billion above the level the President proposed, including an
additional $14 billion for domestic programs.
With the Senate on record in favor of a substantial increase in funding above
the level that the President requested, with Republican moderates in the House
hesitant to agree to a conference report on the budget resolution that did not
specify where the full amount of the additional domestic funding they had been
promised would come from, and with conservative House Republicans opposed to
any discretionary funding above the overall level the President had
proposed, House and Senate Republican leaders decided not even to attempt to
reach an agreement between the two chambers on the budget resolution.
Imposing an Appropriations Cap
Unable to
achieve their goal of using the normal budget process to place a ceiling on
appropriations for 2007 at the level the President had proposed, the Republican
Congressional leadership turned to another approach. In June, the leadership
inserted what is known as a “deeming resolution” — a provision that “deems” the
House and Senate to have agreed to a budget resolution that limits discretionary
appropriations to the level the President proposed — into a “must-pass” bill
that Democrats and Republican moderates could not vote against. (The
“must-pass” bill in question was legislation that provided supplemental
appropriations for U.S. forces in Iraq and Afghanistan.)
When
the must-pass bill was enacted, the limit on appropriated funding inserted into
that bill took effect, just as if a budget resolution capping funding at that
level had been adopted. As a result, the Appropriations Committees in the House
and Senate now are limited to providing non-emergency discretionary funding of
no more than $872.8 billion for fiscal year 2007, which is the Congressional
Budget Office’s estimate of the amount of appropriated funding the President’s
budget requests.
When Congress recessed at the end of
September, the full House had passed all appropriation bills except the
Labor-HHS-Education bill. (The Republican leadership declined to bring the
Labor-HHS-Education appropriations bill before the full House, both because some
moderate Republicans felt that the funding levels provided in the bill remained
inadequate and because the bill included a provision increasing the minimum
wage, which the House Republican leadership strongly opposed.)
Although the Senate Appropriation Committee
approved all of the appropriation bills before the Congress adjourned, the full
Senate has considered only the Defense and Homeland Security bills. The Senate
set the funding level for the defense appropriation bill some $9 billion below
the level the President had requested. Even with this $9 billion made available
for domestic programs, however, many Senators considered the funding levels in
the domestic appropriations bills the Senate Appropriations Committee had
approved to be inadequate; the funding levels in those bills barely equaled the
levels required simply to maintain the current amount of funding, adjusted for
inflation. For this reason (and because of potential Democratic amendments that
the Senate Republican leadership opposed but feared some Republican Senators
might find difficult to vote against before the election) the leadership
decided not to have the Senate consider any of the appropriations bills
(other than the Defense and Homeland Security bills) before adjourning.
Additional
Cuts Required by the Shift of Funding
Back to Defense and Homeland Security
(Budget authority in billions of dollars) |
|
Funding under the original Senate versions of the Defense and Homeland
Security bills, plus the other appropriations bills the Senate
Appropriations Committee has approved |
Funding available now that the Defense and
Homeland Security bills have been enacted |
Defense |
$372.3 |
$377.4 |
Homeland
Security |
$31.7 |
$31.9 |
Available for other nine bills |
$468.8 |
$463.5 |
Total
discretionary funding allowed |
$872.8 |
$872.8 |
Funding reduction required for other nine Senate-passed bills |
|
-$5.3 |
Reduction percentage |
|
-1.1% |
In September,
members of the House and Senate Appropriations Committee met in conference to
work out the differences between the House-passed and Senate-passed versions of
the Defense and Homeland Security bills. They reportedly agreed to accept the
Senate decision to provide $9 billion less in non-emergency funding for the
defense bill than the President had requested. (It was widely expected that any
reduction below the levels the President proposed for the Pentagon would be made
up through subsequent increases in Pentagon “emergency” funding.)
This action by the conferees would have allowed the overall funding levels for
the other appropriations bills to remain at the levels the Senate Appropriations
Committee had approved.
At the insistence of the President, however,
the Congressional Republican leadership ordered the conferees in late September
to shift $5.3 billion of the $9 billion back to defense and homeland security.
This was done in the Defense appropriation conference report that Congress
approved just before adjourning. That conference report has now been signed
into law.
What Will Happen In the
Lame-Duck Session?
Unless Congress decides to jettison its limit
on total discretionary funding, set at the level proposed in the President’s
budget, the shift of $5.3 billion back to defense and homeland security will
require the remaining appropriations bills to be cut below the levels the Senate
Appropriations Committee approved. As shown in the Table above, the nine other
appropriation bills the Senate Appropriations Committee has approved contain a
total of $468.8 billion in discretionary funding. Taking into account the
$372.3 billion in funding provided by the original Senate-passed Defense
bill and the $31.7 billion provided by the original Senate-passed
Homeland Security bill, the overall level of funding in the Senate appropriation
bills exactly equaled the amount allowed under the appropriations ceiling —
$872.8 billion.
With the $5 billion increase in defense
funding over the original Senate level and the smaller increase over the
original Senate level for the Homeland Security appropriations bill, the total
amount provided by the Senate bills will exceed the appropriations cap by $5.3
billion. For Congress to comply with the cap — and to satisfy the President’s
demand that total funding not exceed the amount he proposed — funding for the
nine remaining bills will have to be cut by $5.3 billion below what the Senate
Appropriations Committee has approved.
Illustrative Cuts in Funding for Noteworthy Programs
At this time, there is no way to know how the
additional $5.3 billion in cuts will be distributed across programs. One
distinct possibility, however, is a $5.3 billion across-the-board cut. This
could be achieved by cutting funding for all programs covered by the nine
remaining appropriations bills by 1.1 percent below the levels the Senate
Appropriations Committee voted to provide. For each of the past four years,
Congress has used an across-the-board cut to fit total appropriations within the
applicable appropriations ceiling.
For many programs, the result would be a
total cut of significantly more than 1.1 percent, since the Senate
Appropriations Committee bills already include cuts for numerous domestic
programs. The resulting cuts would affect a number of significant domestic
programs, as the following examples indicate.
- Head Start would be cut by an
additional $75 million, for a total cut of $221 million. The
Labor-HHS-Education bill that the Senate Appropriations Committee approved would
provide $6.789 billion in funding for Head Start for the 2007 program year.
This is $146 million (or 2.1 percent) below the amount needed to maintain the
2006 level of funding (excluding emergency funding related to hurricane Katrina
that was provided for 2006), adjusted for inflation. In other words, the
funding level for Head Start contained in the Senate bill already is $146
billion below the CBO current services baseline. An additional 1.1 percent
across-the-board cut would reduce funding for the program by another $75
million, bringing the total reduction to $221 million (or 3.2 percent).
- Education for the Disadvantaged
(which includes Title I) would be cut an additional $159 million, for a total cut of $479
million. The Labor-HHS-Education bill passed by the Senate Appropriations
Committee would provide $14.447 billion for Education for the Disadvantaged.
This level of funding is $320 million (or 2.2 percent) below the amount needed
to maintain the 2006 level of funding, adjusted for inflation. A further 1.1
percent reduction would cut funding for the program by an additional $159
million, bringing the total reduction to $479 million (or 3.2 percent).
- Pell Grants would be cut by an
additional $139 million, for a total cut of $864 million. The
Labor-HHS-Education bill approved by the Senate Appropriations Committee
provides $12.607 billion in funding for Pell Grants for 2007. That level of
funding is $725 million (5.4 percent) below the amount that would be needed to
maintain the 2006 level of funding adjusted for inflation. A further 1.1
percent reduction would reduce funding for the program by an additional $139
million, bringing the total cut below the baseline to $864 million, or 6.5
percent.
- The National Institutes of Health
would be cut by an additional $315 million, for a total cut of $666 million.
The Labor-HHS-Education and Interior bills approved by the Senate Appropriations
Committee provide $28.629 billion in funding for NIH for 2007. That level of
funding is $351 million (1.2 percent) below the amount needed to maintain the
2006 level of funding adjusted for inflation. A further 1.1 percent reduction
would reduce funding for the program by an additional $315 million, bringing the
total cut below the baseline to $666 million, or 2.3 percent.
Conclusion
Because final action on the nine remaining
appropriation bills for fiscal year 2007 has been put off at least until the
lame-duck session, it is impossible to know what levels of funding ultimately
will be provided for these bills. However, based on actions taken by the
Congress before it adjourned, it now seems likely that programs funded in those
bills will be cut more deeply than would have been the case under the bills that
the Senate Appropriations Committee approved. In other words, domestic
appropriated programs — which have been cut by $12 billion over the last two
years — stand to be cut even further this year.
End Notes:
Joint Committee on Taxation, Estimated Revenue Effects of the Conference
Agreement for the ‘Tax Increase Prevention and Reconciliation Act of 2005,”
JCX-18-06, May 9, 2006; and, Urban Institute-Brookings Institution Tax Policy
Center, “Conference Agreement on the Tax Increase Prevention and Reconciliation
Act of 2005, Fully-Phased in Impact of Major Provisions at 2006 Income Levels,
Distribution of Federal Tax Change by Cash Income Class,” Table T06-0085, May
10, 2006, and “Conference Agreement on the Tax Increase Prevention and
Reconciliation Act of 2005, Fully-Phased in Impact of Major Provisions at 2006
Income Levels, Distribution of Federal Tax Change by Cash Income Percentile,”
Table T06-0086, May 10, 2006.
The Senate Appropriation Committee has reported ten other bills, but we assume
that the District of Columbia bill will eventually be enacted as part of the
bill that funds the Departments of Transportation, Treasury, and Housing and
Urban Development, as was done last year. In the House, there is not a separate
D.C. appropriations subcommittee, and D.C. appropriations are included in the
Transportation bill from the beginning of the process.
The House has passed all of the other appropriation bills except the Labor-HHS
bill. Although the Senate Appropriations Committee has reported all of the
appropriation bills, the full Senate has considered only the Defense and
Homeland Security bills.
This $14 billion includes the effect of an amendment proposed by Senator Arlen
Specter (R-PA) and adopted by the Senate that would allow appropriators
effectively to increase funding for 2007 by $7 billion by increasing advance
appropriations for 2008 by that amount.
For an explanation of how cuts in defense funding, relative to the funding
levels the President has proposed, can be made up through higher “emergency”
appropriations, see Richard Kogan and James Horney, “Why the Application of the
Expected Across-the-Board Appropriations Cut to Defense is Likely to be Purely
Cosmetic,” Center on Budget and Policy Priorities, January 6, 2006.
It is possible that the lame-duck session will be very brief and that Congress
will simply extend the continuing resolution until next February or March,
putting off final decisions on fiscal year 2007 appropriations until the new
Congress convenes. The situation would still be the same in the new Congress,
with the funding for the remaining nine appropriation bills proposed by the
Senate Appropriations Committee (taken together with the enacted Defense and
Homeland Security appropriation bills) exceeding the cap on total appropriations
for 2007.
Since the House assumed that the Defense bill would be funded at the higher
level that ultimately was enacted — and reduced funding in the other
appropriations bills accordingly — no further reductions would be required in
the funding levels contained in the other appropriations bills that the House
passed (or in the case of the Labor-HHS bill, in the bill that the House
Appropriations Committee approved) as a consequence of the actions in late
September to set the final defense and homeland security funding levels above
the levels the Senate had earlier approved.
The Head Start program and a number of education programs are operated on a
program-year basis that covers parts of two fiscal years. For the 2007 program
year, funding is provided in the fiscal year 2007 Labor-HHS appropriation bill
both in the form of an appropriation that becomes available in fiscal year 2007
and an advance appropriation that does not become available until fiscal year
2008. This analysis combines those appropriations (and excludes the advance
appropriation provided for 2007 in last year’s fiscal year 2006 appropriation
bill).
Education for the disadvantaged also is funded on a program year basis. See
footnote 7. |