February 23, 2011 | View Archive
Federal Budget — Countdown to Shutdown or is Compromise in the Air?
The federal government is operating under temporary funding resulting from a continuing resolution (CR) approved by Congress on December 21, 2010. The CR allows the government to operate using FY10 budget amounts until March 4, 2011. Congress has begun the process of creating a budget for the remainder of the current fiscal year (FY11), starting with the much publicized floor debate and votes in the House last week (see "House Consideration of H.R. 1" for highlights). In addition, as required by law, the President submitted his budget request for FY12 on February 14 (see "The FY12 Budget Process Has Also Begun" for details). The Senate has yet to take any budgetary action.
Should the House and Senate not come to terms on a compromise budget proposal by March 4, two likely scenarios could take place. One possible outcome is that the two chambers will reach an agreement to further extend the CR until some date in the future, allowing budget writers and Congressional leadership the opportunity to reach agreement on a more permanent funding vehicle. Some progress was made in this direction this week as key staff from Majority Leader Reid's and Speaker Boehner's offices are meeting.
The second, and increasingly possible, scenario is that no compromise CR is reached and the federal government is shutdown for the first time in fifteen years beginning March 5. While it is not clear what the ramifications of a shutdown will be, some speculation can be gleaned from the experiences of the last shutdown during FY1996.
Possible Ramifications of a Government Shutdown
Specific ramifications of a government shutdown are unknown, but some possible conclusions can be drawn from previous experiences. The most recent example of a federal government shutdown occurred during FY1996. There were actually two separate shutdowns that year, totaling 26 days. During those periods, a series of guidelines and protocols produced by OMB in 1981 were in effect and it is anticipated that these would be used as a model should a shutdown take place this year.
The OMB guidelines state that federal agencies shall not conduct operations, and federal employees shall not be paid, during such time that the government is not funded. There are specific exemptions to this policy, providing for the continuation of activities related to national security, the protection of life and property, the payment of benefits, transportation safety, etc. One specific exemption of note is the continuation of activities "necessary to maintain protection of research property."
House Consideration of H.R. 1, the Full-Year Continuing Appropriations Act of 2011
On Saturday, February 19, the House of Representatives passed an extension of the continuing resolution funding the federal government through the end of the current fiscal year (September 30, 2011). The bill included over $61 billion in cuts to the discretionary federal budget compared to FY10. Nearly 600 amendments were offered and the debate ran for more than 60 hours. Among the amendments were nine aimed to defund various aspects of President Obama's health care law, effectively blocking the administration from carrying out the planned health system overhaul.
While the FY11 measure did pass the Republican-led House, it is highly unlikely that the Senate will consider it. In addition, the bill also faces a veto-threat from President Obama. However, the new majority in the House has certainly changed the nature of the debate, and last week's actions do allow an insight into the House majority's priorities and targets. A summary of key provisions is provided below.
Highlights of H.R. 1:
- Pell Grant maximum cut by $845 to $4705
- National Institutes of Health (NIH) cut by $1.63 billion
- National Science Foundation (NSF) cut by at least $359 million
- Department of Energy (DOE) Office of Science cut by $893 million
- Hispanic Serving Institutions (HSIs) cut by $100 million
Amendments targeting health reform:
- An amendment from Rep. Rehberg (R-MT) that prohibits federal funding from being used to pay any employee, officer or contractor to implement the provisions of President Obama's health care law, stopping the Department of Health and Human Services from implementing the law.
- An amendment from Rep. King (R-IA) that strips funding for any provision of the President's health care law.
- An amendment from Rep. King (R-IA) that prohibits the payment of salaries for any officer or employee of any federal department or agency with respect to carrying out the President's health care law.
- An amendment from Rep. Emerson (R-MO) that bars the use of funds in the bill from being used to implement the individual mandate and penalties and reporting requirements of the President's health care law.
- An amendment from Rep. Price (R-GA) that prohibits the use of federal funds from being used to carry out the medical loss ratio restrictions in the President's health care law. These provisions require insurers to spend at least a certain% of their premium revenues on medical care.
- An amendment from Rep. Gardner (R-CO) that blocks funds for Health Insurance Exchanges, a set of state-regulated health care plans offered under the President's health care law.
- An amendment from Rep. Burgess (R-TX) prohibiting the use of funds for employee and officer salaries at the Center for Consumer Information and Insurance Oversight at the Department of Health and Human Services, created by the President's health care reform bill.
- An amendment from Rep. Pitts (R-PA) that prohibits the funding of salaries for any officer or employee of the government to issue regulations on essential benefits under section 1302 of the President's health care law.
- An amendment from Rep. Hayworth (R-NY) that prohibits funds for the independent payment advisory board.
- An amendment by Representative Hastings (D-FL) to cut from NIH to partially pay for an increase in HIV programs within the Department of Health and Human Services, Health Resources and Services account by $42 million.
Other amendments of potential interest:
- An amendment from Representative Burgess (R-TX) that prohibits the Department of Education from enforcing the restrictions placed on Texas concerning Federal Education Funds.
- An amendment from Representative John Kline (R-MN) that prevents the Department of Education from implementing "Gainful Employment" regulation.
- An amendment by Representative Hall (R-TX) that prohibits the use of funds to establish a NOAA Climate Service.
- An amendment by Representative Walberg (R-MI) that transfers $20.5 million from the National Endowment for the Arts, Grants and Administration to the Spending Reduction Account.
Although Funding for FY11 is Unresolved, the FY12 Budget Process Has Also Begun
With the FY11 final appropriations still in flux, President Obama released the Administration's proposed FY12 budget on February 14. The President's budget proposes $3.7 trillion in spending and $2.6 trillion in revenues, resulting in an estimated deficit of $1.1 trillion; approximately $500 billion less than the projected FY 2011 deficit. The budget proposes to reduce the deficit by $1.1 trillion over ten years, with two-thirds of the reductions coming from spending cuts. These cuts include a five-year, non-security discretionary spending freeze, described as an extension of the three-year freeze proposed last year and therefore based on FY 2010-enacted levels. The freeze is projected to save more than $400 billion over ten years.
Highlights of the President's FY12 budget proposal:
Department of Education
The President provides $77.5B for the Department of Education (an increase of $7.5B over FY10). The budget discusses five educational priorities for the Administration: 1) early learning; 2) education reform; 3) improving the quality and numbers of teachers; 4) college completion; and 5) assisting at-risk students.
The Administration's emphasis on college completion focuses primarily on protecting funding for federal grant and loan programs, but also proposes two new programs. The "First in the World" initiative would be funded at $125 million and is designed as a "venture capital" program to encourage innovative approaches by institutions. The College Completion Incentive Grants program would provide funds to 25 states in the first year, which would in turn provide incentives to institutions. The program would provide $50 million in competitive grants to states to encourage institutions to improve higher education outcomes for students. Participating states would be required to align high school graduation requirements with college preparation, create stronger articulation agreements, facilitate transfers, and provide performance-based funding for institutions.
As for grant programs, while the President maintains the $5,550 maximum Pell Grant award, he does so by eliminating year-round awards and by eliminating the in-school interest subsidy for graduate and professional students. In addition, the budget once again proposes to eliminate the Leveraging Education Assistance partnerships (LEAP) program. It also proposes to consolidate the Javits Fellowship program with the Graduate Assistance in the Areas of National Need (GAAANN) program.
The budget also seeks to expand the Perkins Loan program, enabling more students to take advantage of the loans. Private servicing would be eliminated and the interest rate would equal that of the rate on unsubsidized loans at 6.8%. The Administration would also seek to eliminate the in-school subsidy for borrowers. The proposal as a whole would increase the size of the program from $1 billion to $8.5 billion.
The budget also contains funding for a host of teacher training and preparation programs, including: $250 million for the Teacher and Leader Pathways program; $185 million for a new Presidential Teaching Fellows program; and $206 million for a new Effective Teaching and Learning Initiative in science, technology, engineering, and mathematics (STEM).
With respect to other programs of interest, GEAR-UP, work study and the Supplemental Education Opportunity Grants (SEOG) would both be level-funded, while TRIO would see an increase of $67 million to provide for a new Upward Bound competition.
Department of Health and Human Services
For the Department of Health and Human Services, the budget includes $79.9 billion in discretionary funding, an increase of $115 million (0.1%) over FY 2010 funding.
National Institutes of Health:
The budget proposes $31.748 billion for NIH, an increase of $745 million (2.4%) over the FY 2010 funding level. The budget emphasizes four areas for investment:
- Includes $100 million for the Cures Acceleration Network (CAN), authorized by the Affordable Care Act (P.L. 111-148);
- Accelerating Discovery Through Technology;
- Enhancing the Evidence Base for Health-Care Decisions; and
- Encouraging New Investigators and New Ideas;
- Research training stipends would increase an average of 4%;
- Full-Time Training Positions will decline from FY 2010 by 330 to 16,831 due to the completion of Interdisciplinary Research Training Program in the Common Fund.
NIH projects the budget would support 9,158 new and competing research project grants (RPGs) in FY 2012 (a reduction of 228), with the total number of RPGs expected to be 36,852.The average cost of a new and competing RPG in FY 2012 will be about $433,000.
Highlighted in the NIH budget request is the addition of a much anticipated Center: the National Center for Advancing Translational Sciences (NCATS). Although the details of NCATS' organization and mission are still under consideration at HHS and NIH, the budget statement and previously released documents describe it aligning and bringing together "in one organization a number of trans-NIH programs that are inherently cross-cutting and are ideally suited for incorporation into the new Center." With the stated purpose being to identify and prepare research projects for commercialization, NCATS is expected to include the Clinical and Translational Science Awards (CTSAs), the Cures Acceleration Network (CAN), the Molecular Libraries Program (MLP), the Therapeutics for Rare and Neglected Diseases (TRND) program, the Rapid Access to Interventional Development (RAID) program and the NIH-FDA Partnership formed in 2010 to foster regulatory science. More details will emerge as NIH resolves outstanding issues surrounding the creation of NCATS.
Health Professions Training:
For the Title VII and Title VIII health professions training programs, the President requests a total of $762.53 million, a $264.6 million (36.2%) increase over FY 2010-enacted levels. The President requests $449.45 million for Title VII, a $195.4 million (76.9%) increase over FY 2010. The primary care medicine programs, public health and preventive medicine programs, as well as the workforce information and analysis program would receive substantial increases over the FY 2010-enacted levels. The President's request includes $313.1 million for Title VIII, a $69.2 million (28.4%) increase over FY 2010 levels.
- Freezes Medicare physician payments under the sustainable growth rate (SGR) mechanism, preventing a scheduled cut of more than 25% scheduled to take effect in January 2012. Total cost of the provision is $369.8 billion over ten years – $62 billion in 2012 and 2013, of that, $18 billion would come from ending mechanisms that state governments use to boost Medicaid reimbursements from the federal government. But beyond FY 2013, the Budget does not lay out offsetting Budget cuts for what is likely to be a continuing need to address doctor reimbursement costs
- The president's proposal assumes no Medicare graduate medical education (GME) cuts despite the recent recommendation of the National Commission on Fiscal Responsibility and Reform. The president's budget also reiterates the administration's continued support of Medicaid GME funding for teaching hospitals.
Department of Commerce
The President's Budget Request provides $284 million, a 7.5-% increase, for the Department of Commerce Economic Development Assistance (EDA) programs. A portion of these funds, $40 million, will aid businesses and regions through the Regional Innovation Program authorized in the America COMPETES Reauthorization Act and provide financing for science and research parks.
The Administration's budget for NIST in FY2012 is nearly $1 billion, a 16.9-% increase over the FY2010 level. Of that amount, the budget calls for $764 million for NIST laboratories, $75 million for the Technology Innovation Program, and $12 million for Advanced Manufacturing Technology Consortia.
Manufacturing Extension Partnership:
In addition, the Manufacturing Extension Partnership (MEP), which helps firms identify growth strategies and adopt more efficient manufacturing processes, would see an increase of $17.9 million over FY2010 appropriations to $142.6 million. UT Arlington manages the Texas Manufacturing Assistance Center and receives the majority of its funding from MEP. [NOTE: The House approved $124 million for MEP's FY10 budget in H.R. 1.]
Trade Adjustment Assistance For Firms:
The Administration's budget request seeks to save $15.8 million by eliminating the Trade Adjustment Assistance for Firms program. UTSA administers the Southwest Center under this program.
The Administration is seeking to provide $5 billion to help expand the next generation of wire¬less broadband networks in rural America. The budget allocates $3 billion of spectrum receipts to the WIN Fund, to help develop and promote cut¬ting-edge wireless technologies to advance public safety, Smart Grid, telemedicine, distance learn¬ing, and other broadband capabilities and to fa¬cilitate spectrum relocation. In addition, the Administration is calling for more investment in cybersecurity research and training.
Department of Energy
The budget requests $29.5 billion for DoE, which represents an increase of $3.1 billion, or 11.9%, over the enacted FY2010 level. Within the DOE budget, the Administration's request maintains the doubling path for the Office of Science (SC). Other highlights:
- $5.4 billion for long-term research and development at the Office of Science;
- $550 million for the ARPA-E (41% increase);
- Doubling the number of Energy Innovation Hubs, adding three more across the country to research energy storage, critical materials for energy, and new SmartGrid technologies and systems;
- Basic Energy Sciences: $1.90 billion (24.1% increase);
- Advanced Scientific Computing Research: $645 million (21.5% increase);
- Biological and Environmental Research: $717 million (22.1% increase);
- High Energy Physics: $797 million (0.8% increase);
- Nuclear Power: $754 million for spending on "next-generation" nuclear power including light water reactor sustainability and small modular reactors;
- Nuclear Physics: $605 million (15.9% increase);
- Fusion Energy Sciences: $399 million (4% cut);
- Fossil Fuels: $453 million (44.5% cut) [NOTE: Fossil Fuels research and development budget is focused primarily on the capture and storage of carbon dioxide from coal-powered electricity generators.]
- Workforce Development for Teachers and Scientists: $35.6 million (72.2% increase).
The 46 Energy Frontier Research Centers started in 2009 would be funded at $100 million in this budget, while the Ad ministration is also proposing $146 million to support the three existing Energy Innovation Hubs and to create three new ones. The new hubs would address needs in batteries and energy storage, smart grid technologies and systems, and critical materials.
Programs supported through the Energy Efficiency and Renewable Energy (EERE) account would be funded at a total of $3.2 billion, a 44.1% increase. In addition, since more than 13% of the FY2010 EERE budget had been allocated for earmarks, the Administration's proposal would use those funds to triple industrial technologies, double building and geothermal technologies, and increase many other programs. The exceptions were Federal Energy Management Program, which would be cut by three% and Hydrogen and Fuel Cell Technologies and Water Power, both of which would see significant cuts.
The budget also calls for a new Better Buildings Initiative at $100 million in loan guarantees. The program is geared toward hospitals and universities and would allow the funds to be used to make infrastructure improvements.
National Science Foundation (NSF):
The budget requests $7.768 billion for NSF, an increase of $895 million (13%) over FY 2010 levels. For research and related activities, the President's budget requests $6.254 billion, an increase of $69 million (12.4%). Education and Human Resources (EHR) would increase $38.44 million (4.4%) to $911.2 million and the Major Research Equipment and Facilities Construction (MREFC) account would increase $107.4 million (91.6%).
NSF is proposing a number of interdisciplinary activities within the agency, including:
- Increasing the number of research grants by 2,000;
- $12.4 million for Integrated NSF Support Promoting Interdisciplinary Research and Education (INSPIRE);
- $76.1 million for Research at the Interface of the Biological, Mathematical, and Physical Sciences (BioMaPs);
- New STEM programs, such as Teacher Learning for the Future (TLF) ($20 million), Widening Implementation and Demonstration of Evidence-based Reforms (WIDER) ($20 million), and Transforming Broadening Participation through STEM (TBPS) ($20 million); and
- 2,000 new Graduate Research Fellowships (GRF's) and increasing the stipend levels.
The budget also highlights NSF's proposal to promote competitive markets and encourage entrepreneurship. Some of the pertinent highlights:
- $1 billion for the NSF component of the Wireless Innovation (WIN) fund to significantly expand the nation's wireless broadband capacities (WIN is part of the Administration's new Wireless Innovation and Infrastructure Initiative (WI3)); and
- $146.9 million to support Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs.
NSF's role in key national priority areas in FY2012 include, but are not limited to proposals for:
- Cyberinfrastructure Framework for 21st Century Science and Engineering (CIF21) at $117.0 million;
- Science, Engineering, and Education for Sustainability (SEES) portfolio at $998.2 million; and
- Clean energy investments at $576 million.
The FY 12 request for NASA is $18.7B, the same amount as FY10. The President requested $1B for Space Research and Technology, an increase of $749M over FY10.
Department of Defense (DOD)
The overall Defense budget includes a series of management and acquisition reforms that will produce a net of $78 billion in savings through 2016. Cost-cutting measures include the consolidation of several Air Force operation centers, reduced Army construction costs, and the Navy's use of multi-year procurement strategies.
For Research, Development, Testing, and Evaluation (RDT&E), the department's budget calls for a total of $75.72 billion in discretionary funds, approximately $4.93 billion below the FY2010 levels (6.1% decrease). However, basic research ("6.1" research) would be funded at a total of $2.08 billion (14.5% increase). Applied research ("6.2" research) would be funded at $4.69 billion, (6.0% decrease).
Within the overall RDT&E budget, the Administration seeks to fund the various branches in the following manner:
- RDT&E: $9.69 billion (17% decrease)
- 6.1 research: $436.9 million (4.0% increase)
- 6.2 research: $869.3 million (34.2% decrease)
- RDT&E: $18.01 billion (9.7% decrease)
- 6.1 research: $577.4 million (0.6% increase)
- 6.2 research: $783.8 million (7.6% increase)
- Air Force
- RDT&E: $27.88 billion (level funded)
- 6.1 research: $518.9 million (9.6% increase)
- 6.2 research: $1.18 billion (2.1%) decrease)
- RDT&E: $19.95 billion (4.5% decrease)
- 6.1 research: $545.3 million (44.6% increase)
- 6.2 research: $1.85 billion (7.2% increase)
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