Federal Fiscal Actions in the News
The multiple news stories suddenly flowing out of Washington, DC, about federal fiscal policies and proposals warrant a scorecard to avoid confusion about what has been enacted into law and what is only an opening offer. Last Friday, Congress passed and the President signed a bill that combines an unusual collection of federal fiscal actions: adopting another continuing resolution (CR) to keep the federal government funded through March 23, authorizing full-year spending authority for specified disaster relief, setting the upper spending levels for a two-year budget, adding to and cleaning up some elements in the recent federal tax overhaul, and addressing numerous other outstanding issues that have eluded congressional negotiators for months. This morning, the Trump Administration released the President’s annual budget blueprint of spending proposals for Congress to consider as it develops appropriations bills for fiscal year 2019 that begins October 1, 2018. This Special Edition of Nonprofit Advocacy Matters summarizes these two packages and focuses on how each could affect the work of charitable nonprofits.
Congress Passes a Bipartisan Budget Act
On Friday, February 9, Congress passed and the President signed the Bipartisan Budget Act of 2018 (BBA), a two-year budget deal that authorizes (but does not appropriate) spending $296 billion more in the current and next fiscal years than authorized in previous budget control legislation that had been designed to reduce the federal budget deficit. The 652-page law resolves many controversial details that have stymied progress by Congress, while leaving many other issues for further negotiation and debate.
Continuing Resolution: The BBA provides continuing FY2018 appropriations to keep the federal government open through March 23, 2018. Over the next six weeks, Congress must take the top-level spending targets approved in the new law and turn them into line-item appropriations for each federal department and program. There undoubtedly will be winners and losers in the appropriators' decisions, but the increased spending authority enacted under this law reduces the pressure to rob Peter to pay Paul.
Defense and Nondefense Discretionary Spending: One of the most contentious issues preventing congressional negotiators from reaching an agreement on spending levels was the question of whether and how much defense spending would be increased, and whether nondefense programs, typically those that provide human services – often by hiring nonprofits to provide those services, would be reduced in equal amount or also increased. The BBA boosts defense and nondefense discretionary spending caps by $296 billion over two years: $165 billion for defense, and $131 billion for nondefense.
Spending Decisions: The BBA approves immediately spending $90 billion in additional emergency funds for communities affected by hurricanes and sometimes 2017 wildfires. It also sets aside $20 billion for infrastructure, about one-tenth of what President Trump is calling on Congress to appropriate over the next decade.
Healthcare Programs: After more than a four-month delay, Congress reauthorized the Community Health Center Fund for four years, averting the closure of some of the health centers that collectively serve more than 27 million mostly low-income individuals. The BBA also extends to 10 years the federal funding reauthorization for the Children’s Health Insurance Program, which covers 9 million low-income children and pregnant women. Further, the law reauthorizes for five years a federal program that provides home visiting services to at-risk mothers-to-be and new moms. The law provides $6 billion to address the opioid crisis. It also repeals the Affordable Care Act cuts to Medicaid Disproportionate Share Hospital payments for two years, and doubles the amount of funding available for Child Care Development Block Grants, used to help subsidize care for low-income working parents
Tax-Law Changes: The new law restores or extends about 30 business and individual tax provisions, collectively known as “extenders.” None applies to charitable nonprofits. The BBA also fixes a glitch in the 2017 tax law provision that imposes the 1.4 percent excise tax on nonprofit college/university endowment investment returns. The Senate Parliamentarian ruled in December that language carving out Kentucky’s Berea College violated the Senate procedural provision known as the Byrd Rule. Another provision in the BBA exempts Newman’s Own Foundation from the private foundation excess business holding tax.
Immigration: The budget law doesn’t include legislative language that resolves the status of Dreamers under the Deferred Action for Childhood Arrivals program, but the Senate is scheduled to open the debate this week. Senate Majority Leader McConnell (R-KY) had promised Senate Minority Leader Schumer (D-NY) floor action on immigration legislation in return for voting to reopen the federal government on January 22. Speaker Ryan (R-WI) has not committed to taking action on the measure.
Debt Ceiling and Removal of Fiscal Restraints: Congress suspended the federal borrowing limit, known as the “debt ceiling,” until March 1, 2019, an extension that allows politicians to avoid debating the deficit until after the November elections. The Bipartisan Budget Act also lifts the sequestration caps imposed by the Budget Control Act of 2011 as well as the budget rules, known as pay-as-you-go (PAYGO), that seek to require Congress to counter costs of new spending and tax breaks by reducing spending or raising revenues elsewhere.
President Releases Budget Requests to Congress
The Trump Administration released the President’s budget requests to Congress for fiscal year 2019 that starts on October 1, 2018, titled “Efficient, Effective, Accountable: An American Budget.” The budget blueprint sets forth President Trump’s priorities as Congress prepares to develop new spending bills for the next fiscal year. The plan seeks a range of spending cuts that the Administration asserts will reduce the growth of the deficit by $3 trillion over 10 years, but it does not attempt to balance the federal budget. In an addendum, the Administration makes clear that it views the higher spending levels in the Bipartisan Budget Act as ceilings rather than targets. For instance, it proposes to cut the nondefense spending levels agreed to on a bipartisan basis just last Friday by $57 billion.
Below are key provisions of the President's budget proposal:
Rosy Economic Projections: The budget blueprint relies on growth hitting 3.1 percent this fiscal year and staying above 3 percent through 2024. According to the Washington Post, such a sustained stretch has not occurred since the 1980s. The Congressional Budget Office presumes a more modest 1.9 percent growth.
Health and Social Programs: The President's budget proposes a two-part approach to repealing and replacing the Affordable Care Act: “enactment of legislation modeled closely after the Graham-Cassidy-Heller-Johnson (GCHJ) bill” considered last year, and enactment of unspecified “additional reforms to help set government healthcare spending on a sustainable fiscal path that leads to higher value spending.” The plan also calls for major cuts to Medicare of $554 billion over ten years, and reductions to Medicaid of $250 billion over the same period. Plus, the White House is proposing to reduce funding for the Supplemental Nutrition Assistance Program (SNAP or food stamps) by $214 billion over the next decade. The draft budget suggests expanding work requirements in the SNAP and Temporary Assistance for Needy Families (TANF) programs.
Programs Eliminated: The President is urging through his budget that Congress abolish at least 22 existing programs, including the Corporation for National and Community Service, the Corporation for Public Broadcasting, the Institute of Museum and Library Services, the National Endowment for the Arts, the National Endowment for the Humanities, the Legal Services Corporation, National Wildlife Refuge Fund, and the Global Climate Change Initiative.
Education: The Administration once again calls on Congress to eliminate the Public Service Loan Forgiveness Program, which enables nonprofit employees to erase their student loan debt after 10 years.
Infrastructure Initiative: Through a series of programs, the Administration hopes to generate $1.2 trillion from state and local governments and private investment during the next decade to close what it calls "America’s infrastructure gap." (See the long-awaited infrastructure proposal, a 53-page Legislative Plan for Rebuilding Infrastructure in America that the White House also released this morning.)
Border Security: The President is asking Congress to provide more than $23 billion for border security and immigration enforcement, a figure that includes $18 billion to be spent for wall construction.
Impact of the 2017 Tax Law: The budget blueprint projects that tax receipts will be $314 billion lower in 2018 than it forecast last year and almost $400 billion lower in 2019. The budget documents further project that tax receipts will be $200 billion lower in 2027 than originally expected, acknowledging that the 2017 tax law will not pay for itself, as had been promised by proponents when the legislation was being debated in December.
A Note About Process: The release of the President’s budget requests is merely the start of the congressional budget season. House and Senate committees will conduct nine hearings this week on the President’s proposals, and dozens more will be held in the coming months. The normal procedure calls for the House and Senate Budget Committees to draft a budget resolution that sets spending levels. That step has largely been accomplished in the Bipartisan Budget Act enacted last week. Next, the Appropriations Committees and Subcommittees draft their separate spending bills that set the actual dollars for individual programs, as well as policy provisions, called riders, that restrict federal agencies in the actions they can take. Over the past 20 years, Congress has failed 18 times to complete the appropriations process by the beginning of the fiscal year and has had to resort to passing short-term spending bills, known as continuing resolutions or CRs. For Fiscal Year 2018 that started last October 1, the fifth CR expires on March 23.