Lame Ducks Grand Bargains Punts and Cliffs NASBO

Lame Ducks, Grand Bargains, Punts and Cliffs NASBO Fall Meeting Friday, October 5, 2012 Alexandria, VA Federal Funds Information for States

Where we Left Off in August: What’s the Conventional Wisdom? For appropriations, a CR until the election, BUT… l For BCA, agreeing to postpone the day of reckoning, BUT… l For expiring tax provisions, a bruising fight, possibly informed by the election. l For authorizations, probably nothing, BUT. . . l

Six-Month Continuing Resolution Through March 27, 2013 l FY 2012 + 0. 612% for most discretionary programs (not highways) l Mandatory programs: current-law level l Extends SNAP, TANF, related programs l Additional funds for a few programs l

The BCA and the Sequester l l Absent a legislated alternative, a sequester will occur on January 2, 2013 Many mandatory and a few discretionary programs are exempt – OMB report sheds light on its interpretations OMB estimates of ATB cuts: 8. 2% (nondefense discretionary), 7. 6% (nondefense mandatory), 9. 4% (defense discretionary) ATB reduction applied to FY 2013 funding in effect on January 2, 2013 (CR level)

Lame Duck Possibilities Policy Grand Bargain Punt Cliff FY 2013 Appropriations Unclear Leave for new Congress N/A BCA Sequester Replace/modify Extend deadline Implement sequester 2% payroll tax Probably extend Expires Bush-era rates Maintain for <$250 K Extend Expire AMT Permanent fix Extend Expire at their peril Raise Small increase No agreement Farm bill (nutrition after March) Reauthorize or not Extend No agreement TANF (after March) Reauthorize or not Extend No action Medicaid QI, TMA Reauthorize or not Extend Expire? UI EUC/EB Reauthorize or not Extend Expire Expiring tax provisions: Debt Limit Expiring legislation:

CBO Estimates the Fiscal Cliff

Sequester Coverage Status of FFIS VIP Series Programs 33% Exempt Both 2% 67% Covered

Sequester Coverage Status of FFIS VIP Series Funding Covered 18% Exempt 82%

Grand Bargain Revenue Options l Go after tax expenditures, including: – – l l Itemized deduction for S/L taxes Make S/L bond interest taxable Curb or eliminate mortgage deduction Curb or eliminate tax exclusion for employer-provided health insurance Changes in tax brackets, capital gains, AMT, etc. Create federal sales tax or VAT

The “Other” Federal Spending: Tax Expenditures

Grand Bargain Spending Options l l l Modify Medicaid’s financing structure; other changes to mandatory programs Statutorily limit health spending growth More block grants (Medicaid and SNAP) Consolidate programs (job-training) Reduce/eliminate funding for select programs (Pell grants, housing, abandoned mine payments) Move all S/L workers into Social Security

What’s the Conventional Wisdom? l l l There is none! For more information, visit: www. ffis. org Or contact: Marcia Howard mhoward@ffis. org Trinity Tomsic ttomsic@ffis. org