CHN: Funding for FY 2011 Finalized; Government Shutdown Averted

Half way into the fiscal year and after months of standoff, the House and Senate passed the final FY 2011 spending bill for discretionary programs (those funded annually).  One hour before midnight on April 8, when the federal government was set to shut down, a deal was struck estimated to cut $38.5 billion in spending for the remainder of FY 2011, the largest annual spending reduction ever.  A one-week continuing resolution (CR) was passed to keep the government open and running while allowing time for details of the plan to be ironed out. On April 14, H.R. 1473 passed the House 260-167, with 59 Republicans and over half of the Democrats voting against the bill.  The spending cut was likely too little for the Republicans and too much for the Democrats who opposed the bill.  Later in the day, the Senate passed the bill by a vote of 81-19, with 15 Republicans, 3 Democrats, and 1 Independent opposing passage.  Many programs thought to be at risk were spared cuts.  However, there are significant cuts to housing and community development programs as well as cuts in job training, energy assistance, and other programs.
H.R. 1473 includes deep and damaging cuts to HUD programs, lowering its budget by 6.5 percent below the FY 2010 level by reducing funding for public housing, tenant-based rental assistance, housing for low-income seniors and persons with disabilities, and the Community Development Block Grant, and by eliminating funding for housing counseling assistance, a key service used to mitigate foreclosures.  Job training for adults and youth through the Workforce Investment Act program is cut about 6 percent.   Half of the emergency funds for the Low Income Home Energy Assistance Program (LIHEAP) are cut.  However, many of the biggest cuts to human needs programs proposed by the House were rejected – 218,000 children will not lose Head Start rather, additional funding will allow 60,000 more low-income children to receive a jumpstart to their education; job training will not be zeroed out for the next year; child care will get $100 million more than in FY 2010 (not counting the loss of temporary economic recovery act funding); 81,000 older people will not lose their emergency food packages through the Commodity Supplemental Food Program; one million low-income children will not be hurt because Title I funding for low-income K-12 education was not cut; the maximum Pell grant stays at $5,550, and was not cut by $845; and the large 56 percent cut to the Community Services Block Grant was rejected in favor of a much smaller cut of less than 3 percent.

Passage of H.R. 1437 resolved the confrontation which began in December during the lame duck session when Senate Republicans refused to allow a vote on the FY 2011 funding bill negotiated by the House and Senate that they had helped draft and had agreed not to filibuster.  In February, the new emboldened House majority Republicans first offered a bill that cut $33 billion from FY 2010 spending levels.  Their more conservative members, many elected with Tea Party support, demanded even deeper cuts.  Within three days a new bill, H.R. 1, was produced with seemingly little scrutiny that nearly doubled the cuts to $61 billion, with harsh cuts to human needs programs, including those noted above.  After Democrats in both the House and Senate voted unanimously against the bill, a series of 3 short-term CRs, spanning 6 weeks with $2 billion in cuts for each week, kept the government running.  Negotiations between the Administration, Senate Leader Harry Reid (D-NV) and House Speaker John Boehner (R-OH) led to the final compromise agreement that cuts $38.5 B in FY 2011 spending.

While receiving nearly two-thirds of the amount in total cuts they sought, House Republicans were forced to drop most of the 60 policy changes (‘riders’) they hoped to attach to the bill.  Among the policy changes not included in the H.R. 1437 were ones that would have limited the ability of the Environmental Protection Agency to protect public health by carrying out the standards for clean water and air. (The EPA did take an over-all 17 percent cut in funding, though.) While not including them in H.R. 1437, the agreement reached by the negotiators required the House and Senate to take separate votes on two policy provisions, one barring funding to implement the health care reform act and a second barring funding for Planned Parenthood.  The House passed the health care funding rider 240-185 but the Senate rejected it by a vote of 53-47.  Similarly, the House agreed to the Planned Parenthood rider 241-185 but the Senate defeated it 58-42.

In the aftermath of the passage of H.R. 1437 there is a debate over how much money was actually cut in FY 2011 spending.  The Congressional Budget Office estimated that the final bill reduced ‘budget authority’ by $37.7 billion – that is, it reduced the amount that federal agencies could enter into agreements to pay.  CBO showed that much of those obligated funds would not have been spent in FY 2011, delaying the impact of most of the cuts until FY 2012 and beyond. Between FY 2012 and FY 2016, CBO estimated that $20 billion to $25 billion would not be spent, and also acknowledged that additional reductions were possible that it had no way of measuring now.  It is inaccurate to conclude, as some news reports have suggested, that the H.R. 1437 cut less than $1 billion in the FY 2011 spending bill, although it is true that less than a billion would be cut in the next six months.  (Click here for the CBO analysis.)

The next big confrontation over deficit reduction is looming.  The Department of the Treasury has informed Congress that it will reach the limit on its power to borrow money on May 16, and will run out of mechanisms to extend its borrowing power and avoid default by July 8.  If Congress does not raise the debt ceiling by then Treasury Secretary Timothy Geithner has warned of the dire consequences to the U. S. economy.  The President has asked the leaders and ranking members of the House and Senate to appoint members to participate in a working group headed by Vice President Joe Biden to negotiate a debt reduction plan.  June 24 is the last day both the House and Senate will simultaneously be in session prior to the July 8 deadline.  Most agree that will not be enough time to propose a legislative solution, but perhaps a framework for moving forward might be possible.  Republicans have said that they will not allow the ceiling on the debt to be raised without significant reductions in spending.  Democrats believe that part of the solution to deficit reduction must be raising new revenue, a position rejected by most Republicans.  Stay tuned.

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