FEDERAL BUDGET UPDATE

Transcription

1 FEDERAL BUDGET UPDATE

2 2 PRESENTATION AT THE 2012 FISCAL ANALYSTS SEMINAR JEFF HURLEY NATIONAL CONFERENCE OF STATE LEGISLATURES AUGUST 29, 2012

3 3 FOR THE RECORD FOR MORE INFORMATION COMMENTS AND ANALYSES OURS, NOT REPRESENTATIVE NECESSARILY OF NCSL POLICY ON EACH TOPIC COMMENTS AND ANALYSES BASED ON CURRENT LAW UPCOMING EVENTS WHERE THIS TOPIC WILL BE REVISITED: DECEMBER 6-9, 2012, FALL FORUM, DISTRICT OF COLUMBIA UPCOMING FISCAL OFFICERS MEETINGS INDIVIDUAL STATE PRESENTATIONS

4 4 SUMMARY OF THE CHALLENGE $1.00 SPENDING WITH 60 CENTS OF REVENUE (PLUS FOREGONE REVENUE) DOZEN + YEARS OF EMERGENCY AND NON- OFFSETTING FISCAL POLICY VIA BIPARTISAN AGREEMENTS FOUR STRAIGHT YEARS OF TRILLION DOLLAR + DEFICITS GREAT RECESSION PLUS EARLY 2000 S RECESSION SLOWER ECONOMIC RECOVERY THAN HISTORICAL STANDARDS

5 5

6 6 BCA DEFICIT SAVINGS **August, 2011, deal increases debt ceiling by $2.1 trillion in exchange for the below: Pot 1: $917 billion in discretionary spending ($787 billion without interest savings) over ten years via spending caps

7 7 BCA (continued) Pot 2 2: $1.2 trillion ($984 billion without interest savings) over nine years. $492 billion in non-defense discretionary/mandatory spending. With non-exempt mandatory programs omitted, the reduction to non-defense discretionary programs would be $44 billion per year. $492 billion in defense discretionary spending.

8 8 Federal Fiscal Timeline February - President releases FY 2013 Budget $3T in deficit savings, $350B stimulus package March - Rep. Ryan Budget Resolution $5T in savings May - House Budget Reconciliation 10 year, $261B package All would eliminate sequestration

9 A BRIEF HISTORY OF DEFICIT REDUCTION A BRIEF HISTORY OF DEFICIT REDUCTION STUDIES, REPORTS AND NEGOTIATIONS 9

10 10 DEFICIT REDUCTION REPORTS The National Commission on Fiscal Responsibility and Reform The Co-Chairs Proposal The Bipartisan Policy Center The New America Foundation The Committee for a Responsible Federal Budget The Esquire Commission Several Others

11 11 OTHER DEFICIT REDUCTION NEGOTIATIONS President Obama/Speaker Boehner Vice President Biden/House and Senate members Senate Gang of Six (44) House Gang of 100 Senate Letter from 66 Super Committee of 2011 House FY 2013 Budget Resolution President s FY 2013 Budget

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13 13 Possible Future DR Starting Point? 2011 Summer negotiations between White House and Congress Discretionary Spending $1.1 Trillion Mandatory Spending $ Billion -- Medicaid id $100 b -- Medicaid DME $5 b -- SNF/Home Health $50 b -- Medigap $53 b -- Medical Education $14 b -- Hospital Bad Debt $14-26 b -- Income Means Testing $38 b -- Clinical Labs $9-16 b -- Miscellaneous Health $41 b -- Non Health Mandatory $ b 1 3 Interest Savings Total (approx.) $300 Billion $ Trillion

14 14 Common Features Among Reports/Negotiations Comprehensive in scope include both spending and revenue recommendations put everything or most everything on the table Bipartisan Primarily federal policymakers Missing ingredient: state and local government impact

15 15 Major Areas Addressed with Potential Repercussions for State-Federal t Fiscal Partnerships Domestic discretionary spending Medicaid, Medicare and other mandatory and entitlement programs Federal tax reform Federal tax expenditures Social security Public finance/tax Exempt Financing Medical malpractice Transportation/Energy (low-income programs)

16 16 Advocacy efforts by NCSL 6 NCSL Deficit Reduction Priorities States t expect cuts, but reductions need to be proportionate t White House/Congress should examine all avenues for deficit reduction "Go Big" principle Marketplace Fairness Act Medicaid countercyclical No new unfunded mandates Economic investments

17 17 OTHER PATHS TO SAVINGS Preserve SEQUESTRATION $1.2 trillion (9 years) Repeal TAX CUTS/index AMT $5.0 trillion (10 years) End all NON-DEFENSE DISCRETIONARY $3.4 trillion (10 years) Eliminate all TAX EXPENDITURES $10 trillion (10 years) Block grant MEDICAID $810 billion (10 years) Reduce MEDICARE PROVIDER REIMBS. $345 billion (10 years)

18 FISCAL CLIFF 18

19 19 THE LOOMING CRASH OF 12 April September November December December December December December January Budget Resolution Appropriations Deadline/CR Elections 2001, 2003, 2010 Tax Cuts Tax Extenders Debt Ceiling Payroll Tax, UI, Medicare Reauthorizations Sequestration

20 20 Overall Fiscal Impact - Cost of renewal (in billions) ) /03/10 Cuts $110 $340 $2,800 AMT Patches $125 $225 $1,700 Jobs Measures $115 $150 $150 Medicare Fixes $10 $30 $270 Sequestration $65 $160 $980 Tax Extenders $30 $60 $455 Health Reform $25 $40 $335 Total $500 $1,000 $8,100 Source: Committee for a Responsible Federal Budget

21 21 TAXES TAX CHANGES FEDERAL TAX REFORM FEDERAL TAX EXPENDITURES STREAMLINED SALES TAX STATE TAX PREEMPTION TAX EXEMPT FINANCING TAX EXTENDERS

22 TAX CHANGES EXTEND ALL OR SOME (H.R. 8 vs. S. 3412) EXTEND REDUCED MARGINAL RATES FOR ALL OR SOME EXTEND FOR WHAT DURATION CAPITAL GAINS AND DIVIDENDS TREATMENT CHILD TAX CREDIT MARRIAGE PENALTY RELIEF EARNED INCOME TAX CREDIT ALTERNATIVE MINIMUM TAX ESTATE TAX SMALL BUSINESS EXPENSING EDUCATION T AX INCENTIVES TAX CREDITS FOR FAMILIES

23 23 FEDERAL TAX REFORM REDUCE RATES AND BROADEN THE BASE REVENUE INCREASES OR NEUTRALITY INDIVIDUAL AND CORPORATE REFORM ALTERNATIVE MINIMUM TAX % OF THE ECONOMY CAPITAL GAINS AND DIVIDENDS VALUE-ADDED TAX/NATIONAL SALES TAX TAX EXPENDITURES AS POSSIBLE PAY-FOR PAYROLL TAXES ESTATE TAX

24 24 STREAMLINED SALES TAX S MARKETPLACE FAIRNESS ACT H.R MARKETPLACE EQUITY ACT

25 25 PENSIONS: The Nunes/Burr Bills H.R. 567 (Rep. Devin Nunes, CA) referred to House Ways and Means 51 co-sponsors S. 347 (Sen. Richard Burr, NC) referred to Senate Finance 8 co-sponsors

26 26 Objectives of Both Bills Specifies voluntary * annual reporting requirements for state and local government pension benefit plans Directs the U.S. Secretary of the Treasury to develop model reporting statements e s Directs the U.S. Secretary of the Treasury to maintain a public website where reports will be posted * Any state or local government that does not submit annual employee pension benefit plan reports is denied tax benefits relating to bonds issued by a state or political subdivision during any period of non- compliance

27 27 DATA ACT H.R (Issa) and S (Warner) H.R passed on voice vote and without objection out of House of Representatives S introduced. One hearing held. If legislation proceeds, it will be rewritten and restructured

28 28 REPORTING Requires quarterly reporting of expenditure data for all grants and contracts. t Includes states t and local l governments. Essentially an extension and expansion of American Recovery e and Reinvestment est e t Act reporting. Establishes new Federal Accountability and Spending Transparency Board (FAST) as successor to RATBoard

29 For more information