Revised March 5, 2004
ADMINISTRATION'S BUDGET WOULD CUT HEAVILY INTO
MANY AREAS OF DOMESTIC DISCRETIONARY SPENDING AFTER 2005
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The President’s budget calls for significant cuts in domestic discretionary spending over the next five years. (“Discretionary” programs are those whose funding is determined by the 13 annual appropriations bills. The term excludes entitlements, such as Medicare or veterans’ pensions.) While attention has focused on programs the President proposes to cut or to increase in 2005, there has been far less attention to the longer-run plan included in the President’s budget to cut discretionary spending in nearly all domestic areas of the government in the years from 2006 to 2009.
By 2006, funding for most domestic discretionary programs outside homeland security would be cut below the 2004 funding levels for those programs adjusted for inflation (i.e., below the Office of Management and Budget baseline). Moreover, the cuts would grow over time. By 2009, the Administration’s budget would set funding for these programs $49 billion below the OMB baseline, a 12 percent cut in funding. By contrast, defense and homeland security programs would be funded above the OMB baseline in all years from 2005 to 2009.
The budget also would institute binding discretionary caps that would essentially lock in place this level of reduction in domestic discretionary programs. Under the President’s budget proposals, if Congress approved funding for discretionary programs above the capped levels, across-the-board cuts would be made automatically.
There is a good reason that the cuts proposed for years after 2005 have largely been overlooked in initial reporting on the budget. The budget tables that would normally show these cuts are missing from the budget books that OMB issued on February 2. To find these cuts, one must access a 1,000-page OMB document that covers all budget accounts and underlies the budget and that has been provided, in conjunction with the budget, to the House and Senate Budget Committees and the Congressional Budget Office.
Analysis of the OMB document shows:
- The proposed cuts would affect nearly every part of government — including environmental programs, education and job training, veterans programs, health, and transportation. Under the federal budget, all government programs are placed into one of 19 categories, known as “budget functions.” Examples of budget functions include national defense, energy, education, veterans’ benefits and services, agriculture, transportation, and health. Overall discretionary funding would be cut after 2005 in every category except three: defense, international affairs, and general science, space and technology.
- The cuts grow deeper each year in almost every budget function. Cuts in energy programs would grow from 17 percent in 2006 to 27 percent in 2009; cuts in environmental and natural resources programs would grow from 13 percent in 2006 to 20 percent in 2009; and cuts in employment and job training would grow from 3 percent in 2006 (the Administration proposes to increase funding modestly in 2005 as compared with baseline levels) to 7 percent in 2009. (These figures represent cuts compared with baseline levels — that is, they represent the percentage by which funding for each of these program categories would be set below the 2004 level, adjusted for inflation.) These cuts would result in reductions in government services.
- Many programs touted as Administration priorities that would receive increased funding in 2005 would face reduced funding after 2005. For example, the President’s budget highlights the increased funding it would provide for special education (i.e., for resources provided to states for education and other services for children with disabilities). Special education funding would indeed be increased in 2005. But funding in 2006 for the special education account would be $310 million below the 2005 level. By 2009, special education funding would fall $530 million below the funding provided in 2004, adjusted for inflation.
Among the programs or program areas that would be cut are the following:
- Education for the Disadvantaged: By 2009, Title I funding (funding for school districts to improve educational outcomes for low-income and other disadvantaged children) would fall $660 million below the 2004 level adjusted for inflation.
- Environment: In 2005, funding for the Clean Water Act State Revolving Fund, which loans money to states to pay for sewage treatment plants, would be cut 37 percent below the 2004 level adjusted for inflation. The budget calls for even deeper cuts in this area by 2009.
- Veterans Health Benefits: Funding for veteran’s health services in 2009 would fall 17 percent — or $5.7 billion — below the 2004 level, adjusted for inflation.
- Housing Assistance: Under the President’s budget, funding for the housing voucher program, the nation’s principal low-income housing assistance program would be cut sharply. By 2009, state and local housing agencies would be forced to reduce the number of low-income families and elderly and disabled households assisted by 600,000 — or 30 percent — or to reduce sharply the level of assistance provided to voucher tenants by raising the rents these families pay by an average of $2,000 a year. Most of these families live below the poverty line.
- Head Start and WIC: Head Start funding would fall 7 percent below baseline levels in 2009, resulting in an estimated reduction of 62,000 in the number of children able to participate in Head Start programs. In the Supplemental Nutrition Program for Women, Infants and Children, funding cuts would cause the number of low-income pregnant women and young children at nutritional risk that the programs serves to be cut by approximately 450,000 by 2009.
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End Notes for Summary:
 If the Administration’s FY2009 domestic discretionary funding levels are compared to the CBO baseline, the cut in 2009 is $45.4 billion, or 10.4 percent below the FY2004 level adjusted for inflation. This analysis compares OMB proposed funding levels to the OMB baseline rather than the CBO baseline for ease of analysis. The CBO baseline is slightly lower in aggregate than the Administration’s because of lower inflation projections.
 Starting with the FY 1998 budget, one of the volumes released with the budget — known as the Analytical Perspectives — included proposed funding figures for the budget year and the next four years. This is the first budget in seven years that has not shown the Administration’s proposed funding levels in the four years after the budget year.
 This document can be accessed on the OMB Watch website at:
 See Appendix B for a description of these budget functions.
 The Commerce and Housing Credit function would not be cut in 2009 below the CBO baseline, but discretionary spending in the function would be cut in 2005 through 2008. The 2009 increase is necessary to fund the 2010 Census. Other activities in the function would be cut in 2009.