NATIONAL LOW-INCOME HOUSING NATIONAL LOW-INCOME HOUSING COALITIONCOALITION

BUDGET PROCESS PRESENTATIONBUDGET PROCESS PRESENTATION

Ellen Nissenbaum

Legislative Director

February 27, 2006

32%

21%

21%

17%

2%7% Social Security &

Medicare

Other Entitlements

Defense & HomelandSecurity

Domestic

International

Interest

COMPOSITION OF THE COMPOSITION OF THE FEDERAL BUDGET IN 2005FEDERAL BUDGET IN 2005

Center on Budget and Policy Priorities; last revised February 3, 2006.

KEY COMPONENTS OF THE KEY COMPONENTS OF THE BUDGET RESOLUTIONBUDGET RESOLUTION

By law, the Congress is supposed to pass a CongressionalBudget Resolution by April 15 which typically covers a 5 or 10year period. It sets:

• Annual targets (FY2007-2011 or 2007-2016) for overall spending, spending by function and congressional committee, revenues, and the deficit. It also establishes:

• the overall funding level for the Appropriations Committee• targets (increases or decreases) for entitlement program costs by

“function” and by committee • the overall annual revenue targets (e.g. increasing or decreasing

total revs)

BUDGET RECONCILIATIONBUDGET RECONCILIATION(DOES NOT APPLY TO APPROPRIATED (DOES NOT APPLY TO APPROPRIATED

SPENDING)SPENDING)• A fast-track legislative process established by Stockman to reduce

the deficit by requiring authorizing committees to cut entitlement spending (or to raise revenues too).

• In recent years, reconciliation has been used by Congress to cut taxes. “Reconciliation directives” in the budget resolution require various Congressional committees with jurisdiction over entitlement programs and revenues to produce legislation that will achieve a certain level of changes in entitlement programs or revenues over a certain number of years.

• The committees can choose whatever policies they want to meet the budget targets. The bills crafted by the committees are combined into one or two “reconciliation bills” which are considered under special rules, including a prohibition against a filibuster in the Senate so it only takes 51 votes to pass.

• Congress just adopted the 2005 budget reconciliation bill that cut entitlements like Medicaid, child support enforcement, etc.

• Congress is still working on the 2005 TAX reconciliation bill.

WHAT DOES THE BUDGET WHAT DOES THE BUDGET RESOLUTION NOT DO?RESOLUTION NOT DO?

The resolution is not a law; it’s a “fiscal blueprint” of our nation’s budget priorities

• It does not determine funding levels for particular appropriated programs.

• It does not determine how much of the total funds allocated to the appropriators goes for defense vs. domestic

• It does not determine which entitlements will be cut, or by how much.

• It does not determine which taxes will be cut.

BUDGET AMENDMENTS CAN BUDGET AMENDMENTS CAN HELP DISCRETIONARY HELP DISCRETIONARY SPENDING… OR NOTSPENDING… OR NOT

• When the full Senate takes up the budget resolution, it often considers amendments to “add” funds to certain domestic discretionary programs or areas.

• Unless the amendment increases the TOTAL allocation of funds (“302A”) to the appropriators, it has little IF ANY effect.

• But often amendments are offered just to increase funding to discretionary areas or programs without enlarging the total discretionary “pie.”

• The budget amendments that matter vis-à-vis approps are ones that increase the total funding provided to the appropriations committees.

BUDGET PROCESS: BUDGET PROCESS: THE RULES “DETERMINE THE THE RULES “DETERMINE THE

GAME”GAME”

The budget also may include changes to certain

budget rules, such as procedural requirements for

certain types of bills.

Examples:• Discretionary caps• Pay-as-you-go (e.g. “one sided” on

entitlements)

DISCRETIONARY CAPSDISCRETIONARY CAPS• In 2004, the Administration and congressional Republicans

proposed severe binding statutory caps on total funding for discretionary programs that would have required well over $100 billion in cuts over five years The new Bush budget proposes tough 5 year caps again — with automatic across-the-board cuts (“sequester”) as enforcement if the caps are breached by Congress.

• Experience has shown that discretionary caps can be effective in imposing fiscal discipline if they are: set at reasonable levels, and part of a larger program of shared sacrifice that includes revenue increases and cuts in entitlement programs.

• The statutory discretionary caps that were in place for much of the 1990s met these two tests. (For example, they were accompanied by a balanced “paygo” requirement, described below.) As a result, those caps helped eliminate the deficit over the course of the decade.

DISCRETIONARY CAPS DISCRETIONARY CAPS CONTINUED..CONTINUED..

• In 2005, caps to limit discretionary spending in fiscal years 2006, 2007, and 2008 were established as part of Senate rules. These caps are not as binding as the statutory caps that have been proposed because they can be revised each year in the Congressional budget resolution and exceeding them would not trigger an automatic across-the-board cut in discretionary funding the way exceeding statutory caps would.

• Will Congress accept the Bush proposal for legally binding caps, or simply have caps that, if breached, only raise procedural points of order?

INFLUENCING THE BUDGET PROCESS: “SWIM INFLUENCING THE BUDGET PROCESS: “SWIM UPSTREAM”UPSTREAM”

• Traditionally, many non-profits have ignored budget resolution and the “top line” decisions made and waited to work with federal policymakers until appropriations subcommittee action, or until a Committee prepared to vote on changes to key entitlements.

• By that time, most important decisions have been made, severely limiting policy options and overall allocation of resources. For appropriations, waiting until the subcommittee fight means fighting over smaller and smaller bag of M & Ms. For key entitlements, waiting for Committees to consider changes in key entitlements often means picking and choosing among bad options for the “least harmful.”

• Many non-profits continue to limit their public policy work to spending and do not engage with policymakers to ensure an adequate level of resources for key programs. Over time, will not be able to sustain critical federal programs and responsibilities if we continue to have revenues drop as percent of our economy. Also insufficient attention to impact of federal budget on state budgets/revenues.

• Need more non-profits to understand the budget process, and “swim upstream” to engage at the front end of the process (consideration/adoption of the budget resolution), not “downstream” when most of the major overall decisions have been made.

LEGISLATION ADDING TO DEFICITS:LEGISLATION ADDING TO DEFICITS:MOSTLY TAX CUTS AND DEFENSEMOSTLY TAX CUTS AND DEFENSE

Cost in 2006 of legislation enacted since January 2001

40%

37%

12%

11%Tax Cuts

Defense, Homeland Security and International

Entitlements

Domestic Discretionary (except Homeland Security)

40%

37%

12%

11%

Center on Budget and Policy Priorities; last revised February 17, 2006.

Source: CBPP calculations based on Congressional Budget Office data

IS SPENDING OUT OF IS SPENDING OUT OF CONTROL?CONTROL?

• Claim: Funding for domestic discretionary programs has been growing out of control.

• Response: Funding for domestic discretionary spending has grown by less than 1 percent annually since 2001 when inflation and population growth are accounted for. Relative to the size of the economy, domestic discretionary funding has actually declined since 2001.

• Funding for discretionary programs has grown since 2001, after adjusting for inflation and the increase in the U.S. population, but funding for domestic programs has grown at one-fourteenth the rate of funding for security programs.

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1975 1980 1985 1990 1995 2000 2005 2010

Outlays

(%

GD

P)

Average Outlays as Share of the Economy

1975-2005:21% Outlay Path without Katrina

EVEN WITH KATRINA, FEDERAL EVEN WITH KATRINA, FEDERAL SPENDING IS BELOW AVERAGE FOR SPENDING IS BELOW AVERAGE FOR

RECENT DECADESRECENT DECADES

Outlays with Katrina

Center on Budget and Policy Priorities; last revised February 14, 2006.

Source: CBPP Calculations based on Congressional Budget Office Data

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1975 1980 1985 1990 1995 2000 2005 2010

Rev

enues

(%

GD

P) Average Revenues

As Share of the Economy 1975-2005: 18.3%

2005 RevenuesAs Share of the Economy:

17.5%

REVENUES AS A SHARE OF THE REVENUES AS A SHARE OF THE ECONOMY ECONOMY

ARE BELOW THEIR HISTORICAL ARE BELOW THEIR HISTORICAL AVERAGEAVERAGE

Source: CBPP calculations based on Congressional Budget Office Data

Center on Budget and Policy Priorities; last revised February 3, 2006.

TAX CUTS FOR PEOPLE WITH INCOMES OVER $1 TAX CUTS FOR PEOPLE WITH INCOMES OVER $1 MILLIONMILLION

COST MORE THAN ALL OF THE CUTS IN COST MORE THAN ALL OF THE CUTS IN DOMESTICDOMESTIC

DISCRETIONARY PROGRAMS WOULD SAVEDISCRETIONARY PROGRAMS WOULD SAVE

$0

$10

$20

$30

$40

$50

$60

$70

Bill

ions

of d

olla

rs

Source: CBPP calculations from Office of Management and Budget, Joint Committee on Taxation, and Urban-Brookings Tax Policy Center data.

Tax Cuts for Millionaires:

$67 BillionDomestic

DiscretionaryProgram Cuts:

$57 Billion

Tax Cuts and Spending Cuts, 2011

KEY CHALLENGES AHEADKEY CHALLENGES AHEAD

• Federal Budget Outlooko More tax cuts/ tax reform

o Unsustainable deficits

o Fighting conservative “starve the beast” attacks

o Budget process reform (’07?)These will make it more difficult to make progress on our goals of expanding critical programs, getting people out of nursing homes, etc.

START WORKING TO ENSURE START WORKING TO ENSURE ADEQUATEADEQUATE

GOVERNMENT RESOURCES/REVENUESGOVERNMENT RESOURCES/REVENUESStep 1: Internal institutional work to “connect the dots” between

revenues & funding for critical housing programs (discussion with Board, Policy Committee, etc.).

Step 2: Adopt policy positions in favor of retaining/raising federal & state revenues.

Step 3: Educate the public and supporters about the need for adequate revenues to sustain and improve your programs (op-eds, policy memos, other public communications, etc.).

Specific policies to endorse:

• Restoring “Pay As You Go” rules requiring that tax cuts be paid for.

• Opposing permanent extension of 2001/2003 tax cuts, especially for high-income households.