The Office of Management and Budget’s (OMB) submitted its reports on discretionary spending cuts to the President and Congress just ahead of the release of the President’s Budget Request. Along with a the review of spending caps, OMB also released a preview of sequestration in the spending plans for fiscal year (FY) 2014, which looks at discretionary spending out to 2023.
The Final 2013 Sequestration Report provides estimates of discretionary spending limits for each category in the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA), OMB’s scoring of the enacted 2013 discretionary appropriations bill, and comparisons with estimates from the Congressional Budget Office (CBO) in its Final Sequestration Report for Fiscal Year 2013. Examining appropriations legislations enacted through April 4, 2013, OMB found that the enacted appropriations are within the discretionary spending limits for 2013 and a sequestration of discretionary budget authority is not required. (Note: The assessment by OMB is distinct from the Joint Committee sequestration.) The chart below shows the caps after various re-categorization adjustments.
BBEDCA provides caps for discretionary program spending each year through 2021. Originally, discretionary programs were separated into “security” and “non-security” categories, which are shown above in the funding levels for fiscal years 2012 and 2013.
· The security category included budget accounts for the Departments of Defense, Homeland Security, Veterans Affairs, the National Nuclear Security Administration (NNSA), the Intelligence Community Management Account, and all accounts in the international affairs budget function.
· The nonsecurity category covered everything else. After 2013, BBEDCA provided a single category for all discretionary spending.
The Budget Control Act (BCA) allowed for revision of the spending caps if the Joint Select Committee on Deficit Reduction proposed legislation to reduce the deficit by $1.2 trillion was not enacted by January 15, 2012. Since legislation was neither proposed nor enacted, the caps were revised in OMB’s Final Sequestration Report of Fiscal Year 2012, which was issued January 18, 2012.
· The revised security (“defense”) category included only funding for discretionary programs in the national defense budget function: Department of Defense, portions of Department of Energy (including NNSA), and the Federal Bureau of Investigation.
· The revised nonsecurity (“non-defense”) category covered all other discretionary programs.
· The discretionary category for 2014 to 2021 was replaced by caps for the defense and non-defense categories. While the budget caps were adjusted to reflect the redefined categories, the overall discretionary spending limits were not changed.
The spending caps were changed again, under the American Taxpayer Relief Act of 2012 (ATRA), which reinstated the security and non-security categories for 2013 and reduced the limits by $4 billion, split evenly across the two categories. The limits for defense and non-defense spending were left in place for 2014 to 2021. However, the 2014 levels were lowered by $8 billion, split evenly across the defense and non-defense categories.
The preview report sheds light on several proposed revisions to the spending caps in the President’s Budget. The 2014 Budget includes savings in the mandatory and revenue categories, reducing the discretionary limits, restoring the 2013 sequestration amount, cancelling the 2014 mandatory sequestration order, and increasing the 2014 discretionary levels to those agreed to by Congress in ATRA. The Budget Request also proposes extending the spending caps through 2023. The reductions continue to be split between defense and nondefense categories and are set to take effect in 2017.
While discretionary spending at the budget proposal levels shows less growth, the levels are higher overall. According to the FY2014 Budget Proposal figures in OMB’s Sequestration Preview Report for FY 2014, the discretionary funding levels from 2013 to 2012 average $25.9 billion above those in the Final Sequestration Report for FY 2013.
The gap between the two plans for FY 2014 leaps out as a notable difference in the two series. The $97 billion increase from the Final 2013 Sequestration report is comprised of several changes. In the budget proposal, both the discretionary categories see an increase from restoring limits from ATRA. The revised security category receives an additional $54 billion, and the revised nonsecurity category receives $37 billion. While the proposed budget shows less of a drop than the Final Sequestration figures, spending rebounds a year later. If the proposed budget is accepted (though, there's ample reason to doubt that it will be), spending would approach 2013 spending levels in 2019.
Originally published for Federal Industry Analysis: Analysts Perspectives Blog. Stay ahead of the competition by discovering more about GovWin IQ. Follow me on twitter @FIAGovWin.