GM 13-024

Sequestration of FY 2013 Funds Goes into Effect

Congress has not been able to reach an agreement to avert an across-the-board sequestration of FY 2013 funds, and so today the President, as required by the Budget Control Act of 2011, will issue an order to federal agencies to begin making funding reductions totaling $85 billion.” The cuts are to be equally divided between defense and non-defense programs. Congress could approve legislation to modify or eliminate the sequestration, but that is looking increasingly unlikely.

Some programs are statutorily exempted from the sequestration including child nutrition programs; Child Care Block Grant entitlement funds; Commodity Supplemental Food Program; Family Support Funds; Pell Grants; Grants to States for Medicaid; Foster Care and Adoption Assistance; Supplemental Security Income; Social Security; the Temporary Assistance for Needy Families (TANF) program and the TANF Contingency Fund. Among other exempted programs are veterans programs, appropriations designated as “emergency”, unemployment insurance and civilian and military retirement. Medicare would be limited to a two percent provider reduction (benefits would be exempted).

Adding to the uncertainty surrounding federal funding is that no full year
FY 2013 appropriations bills have been enacted. FY 2013 funding is currently being provided at FY 2012 levels through March 27, 2013. Congress must enact FY 2013 appropriations bills or enact another continuing resolution (CR) in the very near future.

House Appropriations Chair Rogers (R-KY) announced that next week he will propose a Continuing Resolution paired with Defense and Military Construction-Veterans Affairs bills. Senate Appropriations Chair Mikulski (D-MD) intends to propose an omnibus appropriations bill to cover all agencies for the rest of the fiscal year – it will differ from the CR in that programs won’t necessarily be funded at their FY 2012 levels as is the case under the current CR. The sequestration – unless modified – would be applied to those bills.

We attach a memorandum of February 27, 2013, from the Office of Management and Budget (OMB) to federal agencies with regard to their responsibilities in administering the cuts. Agencies are to be guided “by the principle of protecting the agency’s mission to serve the public to the greatest extent practicable.”

The OMB also issued a report this week which asked for specific “anomalies”, recommending that they be incorporated into any extension of the FY 2013 CR. Among the requested provisions are:

• Carcieri fix language to clarify that the Indian Reorganization Act applies without regard to whether a federally-recognized tribe was under federal jurisdiction in 1934.
• Updating of a public law citation in Section 408 of the Department of Interior Appropriations Act to continue the limitation on BIA and IHS contract support costs.
• An additional $75 million for Head Start
• An extension through September 30, 2013, of the Temporary Assistance for Needy Families program and Child Care and Development Block Grant entitlement funds.
• Authorization for the Indian Housing Loan Guarantee program to increase its fee by one percentage point. Without this increased revenue, the program is expected to shut down on or before August 12, 2013.
• Several technical changes to MAP-21 surface transportation authorization.

We will continue to follow developments in federal agencies and in Congress on sequestration and other appropriations matters.