Budget

Summer Federal Appropriations Update

As we approach the dog days of summer, the federal appropriations process is finally heating up. This follows several months of being on hold as Congress tried to address the growing coronavirus pandemic, the staggering drop in unemployment, and cries for action regarding racial injustice and police brutality.

With Election Day less than four months away, several critical questions remain. Will Congress finish its consideration of all twelve appropriations bills before the September 30th fiscal year (FY) 2021 deadline? What are the chances of a continuing resolution and what length will it be? And what impact will the election results have on how the appropriation process plays out? We will consider these questions and more below.

What is happening in the House?

After months on hold because of the focus on coronavirus and police reform packages, the House is now pushing through their appropriations markups at lightning speed. The full Committee passed their FY 2021 302(b) subcommittee allocations last week along with five appropriations bills: Agriculture-Rural Development-FDA, Interior-Environment, Military Construction-VA, Legislative Branch, and State-Foreign Operations. The Committee wrapped up their consideration and approval of the remaining seven bills this week: Commerce-Justice-Science, Defense, Energy-Water Development, Financial Services-General Government, Homeland Security, Labor-HHS-Education, Transportation-HUD.

Initial reports are saying that Agriculture-Rural Development-FDA, Interior-Environment, Military Construction-VA, and State-Foreign Operations bills will be combined into a minibus package and considered on the floor late next week. House Majority Leader Steny Hoyer (D-MD) indicated that he wants the House to approve all twelve bills on the floor by the end of July. However, the Homeland Security bill might be held back because of concerns from progressive Democrats about funding levels for customs and border protection and immigrations and customs enforcement.

It is worth noting that these bills will probably be passed mostly or entirely along party lines. Since the Senate must reach a 60-vote threshold to end debate on appropriations bills, whereas the House only needs a majority vote, the Senate has to forge bills that are more bipartisan. This means that these more partisan House bills are likely to sit and not be taken up by the upper chamber for serious consideration.

What is happening in the Senate?

Unlike in the House, crickets can be heard in the Senate Appropriations Committee. The Committee has held just two hearings since March, and both were on issues unrelated to the FY 2021 appropriations process.

It was reported several weeks ago that partisan disagreements on police reform and COVID-19 spending is to blame for the delay of Senate appropriation bill markups. Ranking Member Patrick Leahy (D-VT), noting that offering amendments was a key concern for Democrats, said “There is bipartisan agreement that we need to address the COVID-19 pandemic. And if we want to truly address the issues of racial injustice that George Floyd’s tragic death has brought to the surface… we need to appropriate money for programs that advance these issues.” Committee Republicans, led by Chairman Richard Shelby (R-AL), felt that these issues should be addressed outside of the appropriations process.

Markup notices for their appropriations bills were reportedly postponed due to these disagreements. While it is very likely that most of their bills are already drafted, we probably will not see any markups until the Committee leadership can agree to move forward in a bipartisan way.

What is going to happen next?

There is one thing that is all but guaranteed: there will be a continuing resolution (CR) to keep the federal government open past the September 30th deadline. Between the upcoming August recess and the desire of members to be home to campaign for competitive races, there are not a lot of congressional workdays left on the calendar.

This continuing resolution will likely be a short-term, stopgap solution just to get Congress through the FY 2021 deadline and election season. Although a specific date is hard to determine, it would likely extend current federal funding levels to at least early to mid-December.

The election outcome is also likely to influence how the federal appropriations wraps up. History tells us that during an election year, lawmakers are likely to hold an average of seven appropriations bills over until the next calendar year. They say to the victor goes the spoils – as well as the incentive to shape the final bills once the winning party takes control. If the Democrats win the presidency and/or the Senate, we can certainly expect them to punt the bills into 2021 when they will have more influence over the process.  

Stay tuned to eRegions, Transportation Thursdays and the Regions Lead blog for the latest federal appropriations updates.

2018 Omnibus Appropriations Bill Bolsters Many State and Local Programs

Following the release of the $1.3 trillion fiscal year 2018 omnibus appropriations bill on March 21, NARC staff has been combing through the 2,232 page document to learn how localities will be impacted by these federal program funding levels. Much of it is great news for regions! The bill proposes additional funding for so many of the priorities we have advocated for over the last year.

Here are a few highlights:

Transportation

TIGER Grants: The TIGER program increased to $1.5 billion, tripling FY 2017’s funding level of $500 million. It provides some planning money for the first time in many years, allowing for up to $15 million in planning grants. A minimum of 30 percent of the funds are reserved for rural areas, an increase from the current 20 percent requirement.

STBGP: FAST Act highway programs are fully funded, and the bill also includes a one-time increase of $198 billion for the Surface Transportation Block Grant Program (STBGP). The increase will be distributed as it is through the FAST Act, meaning that funds will be suballocated to local areas. The funds are only eligible for road, bridge, and tunnel projects, and the STBGP set-aside (TAP) is waived. The bill includes an additional amount for public/Indian lands and territories ($320 million), and a new competitive bridge program in states with densities of less than 100 persons per square mile ($225 million).

New Life for New Starts: While the administration proposed narrowing the Capital Investment Grants Program (New Starts) funding to only cover projects already underway, the omnibus agreement provides nearly $400 million for new projects. This is an overall increase of $232 million.

Transit: Transit receives full FAST Act funding with an additional $834 million in general fund appropriations, which includes funding for state of good repair grants, buses, and bus facilities.

Rail: The bill includes large increases for several Federal Railroad Administration programs, including Amtrak which will receive $1.9 billion (an increase of $447 million) with $650 million allocated for capital projects along the Northeast Corridor (an increase of $322 million). The bill also includes funding for three FAST Act rail programs that previously received far less than their authorized amounts: the consolidated grant program to support PTC installation ($593 million), the federal-state partnership state of good repair program ($250 million), and restoration and enhancement grants ($20 million).\

Extends FAA: The Federal Aviation Administration reauthorization is now extended through September.

Automated Vehicle Research: The bill repurposes funds to create a $100 million pot for study grants and implementation of an overall study program.

No Rescissions: The previous version of House and Senate bills would have rescinded contract authority, and an amendment by Representative Rob Woodall (R-GA) to the House bill would have made suballocated STBGP subject to rescission. Since this bill ditches the rescission, there is no need for the amendment.

Clearview Font: The bill temporarily prohibits the use of funds to enforce the termination of an Interim Approval to use the Clearview Font on highway signs and requires FHWA to conduct a “comprehensive review” of the research and report back to the House and Senate Appropriations Committees.

Aging Programs

ACL: The Administration for Community Living is funded at $2.171 billion, a $178 million increase from fiscal year 2017.

Senior Workforce: The Senior Workforce Development Program remains level at $400 million, rejecting the Trump administration’s proposal to eliminate the program and the House’s proposal to cut the program funding by 100 million.

OAA, Title III: The Older Americans Act (OAA) Title III programs received significant increases:

  • $35 million increase to OAA Title III B Home and Community-Based Supportive Services
  • $59 million increase to Title III C Nutrition Services
  • $5 million increase to Title III D Preventative Health
  • $30 increase to Title III E Family Caregiver Support

Census Bureau

Boost to Census Funding: The Census Bureau is funded at $2.8 billion, an increase of more than $1.344 billion from fiscal year 2017. Over $2.5 billion of that amount will be going to periodic censuses and programs, including efforts to continue preparations for the 2020 Census Survey.

Community and Economic Development

CDBG and HOME: The Community Development Block Grant Program (CDBG) is funded at $3.3 billion – the amount NARC and the CDBG Coalition requested. The HOME Investment Partnerships Program is funded at $1.362 billion, an increase of $412 million. The Trump administration proposed to eliminate funding for both programs in fiscal years 2018 and 2019.

SSBG & CSBG: The Social Services Block Grant (SSBG) and the Community Services Block Grant (CSBG) received level funding at $1.7 billion and $715 million, respectively.

State Workforce Formula Grants: Increased grants under Title I of the Workforce Innovation and Opportunity Act (WIOA) by a combined $80 million, including:

  • $30 million increase to WIOA Adult program
  • $30 million increase to WIOA Youth programs
  • $20 million increase to WIOA Dislocated Worker state grants

EDA: The Economic Development Administration (EDA) received a $25.5 million increase. This allocation ignores the Trump administration’s recommendation to eliminate funding for the agency.

Environment

Brownfields Authorization Language: The omnibus package contains the brownfields reauthorization language NARC has pushed for, including:

  • Allowing local governments to acquire abandoned or tax delinquent property that is contaminated and to clean up the property without fear of liability
  • Funding for brownfields cleanup grants
  • Creating a multipurpose brownfields grant
  • Allowing for the recovery of limited administrative costs

Urban and Community Forestry Program: The Urban and Community Forestry Program is funded at $28.5 million, an increase from fiscal year 2017. The omnibus package also includes a comprehensive fix for wildfire funding.

Energy

Energy Efficiency and Renewable Energy Program: The U.S. Department of Energy’s Energy Efficiency and Renewable Energy (EERE) Program is funded at $2.32 billion, a significant increase of $290 million. Rather than follow the Trump’s recommendations to cut the program by three-fourths, Congress chose to increase EERE’s funding by 14 percent.

LIHEAP: The Low-Income Home Energy Assistance Program is funded at $3.64 billion, a $250 million increase. This program has been slated for elimination by the Trump administration for fiscal years 2018 and 2019.

Flood Insurance

NFIP: The National Flood Insurance Program (NFIP) is giving a short-term reauthorization through the end of July, incentivizing Congress to complete a full reauthorization before the August recess.

Rural Development

New Broadband Loan and Grant Program: The U.S. Department of Agriculture (USDA) Rural Utilities Service received $600 million for a new broadband loan and grant pilot program.

Rural Development Programs: Rural development programs receive $3 billion, an increase of $63.7 million from fiscal year 2017. This includes decreases to the Rural Housing Service and Rural Utilities Service programs, which are funded at $1.99 billion and $661.4 billion respectively.

Substance Abuse Crisis

Opioid Crisis Relief: Includes a $3.2 billion increase for programs responding to the opioid crisis, including funding for prevention, treatment, law enforcement, and other purposes.

Water

Coastal Zone Management Funding: The Coastal Zone Management Program is funded at $75 million, a $5 million increase from the previous fiscal year.

USDA Water/Wastewater Loans: USDA’s Rural Water and Wastewater Program would allow more than $3 billion in loans, $1.8 billion more than the previous fiscal year.

Water State Revolving Funds: The omnibus package provides $2.89 billion in funding to Clean Water State Revolving Funds and Safe Drinking Water State Revolving Funds, an increase of $300 million for each program. The WIFIA loan program also saw an increase in funding this year, currently standing at $63 million.

What Happens Next?

The bill quickly passed through the House and the Senate, leaving one last hurdle: getting the president’s signature. Trump tweeted this morning that he is considering a veto because of two factors:

  • The bill presents no action on the Deferred Action for Childhood Arrivals (DACA)
  • The bill does not provide the full $25 billion the president requested to build a US-Mexico border wall.

On Thursday, March 22 White House Budget Director Mick Mulvaney told reporters that the president would sign the bill. The president has until midnight tonight to sign the bill to avoid a federal government shutdown. If he vetoes the bill and it goes back to Congress, a short-term continuing resolution might be employed to avert a shutdown and buy more time to discuss next steps.

UPDATE, March 23 at 1:30 PM ET:

In a White House press conference, President Trump signed the fiscal year 2018 omnibus appropriations package, making it public law. The legislation provides funding for the federal government through September 30, the end of fiscal year 2018. Although the president said, “there are a lot of things I’m unhappy about with this bill,” he approved the bill for national security reasons and because it authorizes a major increase in military spending. He criticized the rushed process Congress took to pass this bill, saying he would “never sign another bill like this again.”

President Releases Budget that Would Undercut Funding to Regions

On February 12, the president officially submitted his fiscal year (FY) 2019 budget proposal and addendum to Congress. Much like last year’s FY 2018 budget proposal, the FY 2019 recommendations would make significant programmatic and funding changes to federal programs:

  • The proposed budget would ratchet up the amount of money made available for military spending. The president’s budget would allocate $647 billion for defense spending in FY 2019 – the topline level established by the recent congressional two-year budget caps deal.
  • The recommendations advise Congress to enact significant funding reductions and change program benefits and participation requirements for mandatory federal programs (including SNAP, Medicare, and Medicaid) and a wide range of non-defense discretionary (NDD) programs.
  • The president’s budget would allocate only $540 billion for NDD spending – $57 billion less than the budget cap Congress set for FY 2019. This leaves a noteworthy $107 billion parity gap between defense and NDD funding levels in the new fiscal year.

The president’s FY 2019 budget recommendations would either slash or eliminate funds for many of the NDD programs regions use to address housing, transportation, health, workforce, energy, and other community needs. This is likely to place a greater burden on local governments everywhere, requiring them to devote more staff and financial resources to ensure the needs of their residents are met.

The following is a summary of the recommendations in the president’s budget and addendum for selected departments, agencies, and programs that we are monitoring because of their potential impact on communities:

NOTE: These numbers are comparisons to the FY 2017 enacted or actual levels since the FY 2018 omnibus was not yet passed at the time of this publication. The department/agency totals reflect discretionary funding unless stated otherwise.

U.S. Census Bureau
FY 2019 proposed funding level: $3.8 B (+2.3 billion, 153 percent)

U.S. Department of Agriculture (USDA)
FY 2019 proposed funding level: $19.2 B (-$3.5 billion, 15 percent)

  • Sharp decreases to the Supplemental Nutrition Assistance Program (SNAP) over the next ten years (-$213 billion, 30 percent). The proposal also includes other benefit and eligibility cuts that will cause at least 4 million people to lose their SNAP benefits
  • Limits eligibility in the crop insurance program and caps premium subsidies
  • Proposes a $136 million cut to conservation programs
  • Zeroes out Rural Economic Development Loan and Grant Program (-$318 million over the next four years)

U.S. Department of Energy (DOE)
FY 2019 proposed funding level: $30.6 B (+$521 million, 2 percent)

  • Zeroes out Weatherization and Intergovernmental programs funding (-$278 million, 100 percent)
  • Significantly reduces funding for the Office of Energy Efficiency and Renewable Energy, which houses programs focused on sustainable transportation; renewable energy such as wind, solar, water, and geothermal, and energy efficiencies such as advanced manufacturing and building technologies (-$1.3 billion, 66 percent)
  • Most of the proposed increases in funding would be for fossil energy programs and national nuclear security activities

U.S. Department of Health and Human Services (HHS)
FY 2019 proposed funding level: $95.4 B (+$9.1 billion, 11 percent)

  • Zeroes out Low-Income Home Energy Assistance Program funding (-$3.4 billion)
  • Zeroes out Social Services Block Grant (-$1.7 billion)
  • Reduces the Temporary Assistance to Needy Families (TANF) Block Grant and eliminates the related TANF Contingency Fund
  • Provides a total of $10 billion in additional discretionary funds to address the opioid crisis and mental illness

U.S. Department of Housing and Urban Development (HUD)
FY 2019 proposed funding level: $41.2 B (-$6.8 billion, 14 percent)

  • Zeroes out Community Development Block Grant (CDBG) program funding (-$3 billion)
  • Zeroes out HOME Investment Partnerships Program funding (-$950 million)
  • Decreases funding across HUD’s rental assistance programs (-11 percent)
  • Low-income households that receive housing support would now have to pay 35 percent of their income for housing, rather than the current 30 percent

U.S. Department of Labor (DOL)
FY 2019 proposed funding level: $10.9 B (-$1.1 billion, 9 percent)

  • Zeroes out Senior Community Service Employment Program funding (-$400 million)
  • Keeps Workforce Innovation and Opportunity Act (WIOA) funding at or just above level funding
    • WIOA Adult: (+$4.9 million, 1 percent)
    • WIOA Youth: (±0 million, 0 percent)
    • WIOA Dislocated Worker: (+$5.8 million, 1 percent)
  • Increases funding for national apprenticeship program activities (+$105 million, 111 percent)

U.S. Department of Transportation (USDOT)
FY 2019 proposed discretionary funding level: $15.9 B (-$3.4 billion, 18 percent)

  • Zeroes out TIGER grant program funding (-$500 million)
  • Zeroes out New Starts program funding for new projects, limiting funding to projects with existing full funding grant agreements only (-$1.4 billion)
  • Decreases Essential Air Services program funding (-57 million)
  • Reduces federal support for Amtrak and other rail programs (-$892 million)
  • Significantly reduces funding for Transportation Planning, Research & Development (-$4.1 million), Research and Technology (-$6.0 million), Cybersecurity Initiative (-$5.0 million) and other programs housed under the Secretary of Transportation

U.S. Economic Development Administration (EDA)
FY 2019 proposed funding level: $0 (-$300 million, 100 percent)

U.S. Environmental Protection Agency (EPA)
FY 2019 proposed funding level: $6.1 B (-$2.1 billion, 26 percent)

  • Small increase for the Clean Water State Revolving Fund (+13.1 million, 1 percent), but a decrease for the Drinking Water State Revolving Fund (-81.1 million, 9 percent)
  • Increases Water Infrastructure Finance and Innovation Act (WIFIA) program funding (+10 million, 50 percent)
  • Decreases State and Local and Tribal Air Quality Management Programs (-$67 million, 29 percent)
  • Reduces brownfields projects funding under State and Tribal Assistance Grants (-$26.4 million, 30 percent)
  • Decreasing the overall funding they are dedicating to provide Americans with clean air (-$355 million, 46 percent), water (-$796 million, 22 percent), and land (-$171 million, 14 percent)

Federal Emergency Management Agency (FEMA)
FY 2019 proposed funding level: (-$355 million, 8 percent)

  • Largest cut to the agency is to the Federal Disaster Assistance program (-$379 million, 13 percent)

It would be easy to say that this budget was “dead on arrival” or that it will have no impact on Congress’ work, but the reality is that no one should write-off the president’s budget proposal. The document often serves as a framework for initial appropriations bills in the House and Senate. Additionally, many of House Speaker Paul Ryan’s priorities have been included in this budget proposal, including cuts to entitlement programs – especially the TANF program – and serious consideration to impose work requirements on households that receive social benefits.

Congress has yet to pass a final appropriations bill for FY 2018, so enacting the president’s proposed course of action for FY 2019 is unlikely to happen anytime soon. But depending on the outcome of the midterm elections, more members of Congress could potentially support the president’s priorities for FY 2019 than those currently in the 115th Congress.

NARC will continue to monitor and report the budget and appropriations debate as it unfolds. If you have specific questions about FY 2018 or FY 2019 appropriations, please reach out to Neil Bomberg (neil@narc.org) or Maci Morin (maci.morin@narc.org).

Concerns Grow Over the Impacts of House and Senate Tax Bills

Congress is back from Thanksgiving break and confronted with some significant choices, including passage of a tax bill that substantially reduces the corporate tax rate and eliminates some common individual tax deductions, like the property tax and the inheritance tax.

From the outset, the goal has been to pass a tax cut bill – good or bad — before Congress breaks for the Christmas holiday. To do this House and Senate Republicans are moving at breakneck speed to get the bill to the president for his signature.

This week the Senate will begin considering its version of the tax reform bill, which is wildly unpopular with the general public. The House passed its version two weeks ago, and if Senate Republican leaders have their way, their version will pass in the next week. This leaves just enough time to conference the two bills and create a single version that can be adopted by both chambers and get it to the president’s desk before the Christmas recess.

Join the National Association of Regional Councils (NARC),
National Association of Counties, and National League of Cities
in opposing the specific changes to tax deductibility and municipal bonds proposed by the House and Senate.
Local Consequence
State And Local Tax

The House and Senate bills would substantially reduce the value of the state and local tax (SALT) deduction on personal taxes or eliminate it entirely, and this would have a negative impact on localities. Though it would generate $1.1 trillion in new revenue for the federal government, it would place substantial pressure on states and localities to reduce their taxes, which in turn would shut off one of the most important revenue sources available to states, counties, and municipalities.

If the SALT deduction is substantially reduced or eliminated, Congress and the president will have demonstrated their complete lack of understanding of the federal partnership that makes infrastructure development in this country possible.

Nearly three-fourths of all infrastructure development is funded by states, counties, and cities. Reducing revenues and other funding sources for infrastructure development is likely to substantially exacerbate an already dire situation in which 56,000 bridges are structurally deficient, upwards of 70 percent of roads in some states are in mediocre to poor condition, and schools, hospitals, airports and other public facilities are in need of repair.

Municipal Bonds

Consider the National Association of Counties’ (NACo) commentary on the House bill and its impact on counties and, by implication, cities.

The House bill would limit what types of municipal bonds are tax-exempt. Bonds used for professional sports stadiums would not be tax-exempt, even though some counties own and maintain professional sports stadiums. According to NACo, “narrowing the scope of tax-exempt municipal bonds would open the door to future changes that would further restrict which types of projects can be supported by municipal bonds.” The cost of borrowing would also increase considerably because bonds that are not tax-exempt would need to have higher interest rates to attract investors.

The House bill would also eliminate the tax-exempt status of advance refunding bonds, which are most often used by governments to refinance their debt at lower interest rates so that the overall cost of a city or county project is less. While most municipal bonds would retain their tax-exempt status, this type of municipal bond would no longer be tax-exempt, again requiring states and localities to forgo a procedure that often substantially reduces the cost of borrowing by counties.

Finally, the House bill would require that interest generated from private activity bonds (PABs) be taxed. PAB financing generally benefits private developers who benefit from lower financing costs when developing projects that have a clear public purpose (e.g. hospitals, airports, affordable housing, seaports, water and sewer systems).

If PABs were no longer tax-exempt, organizations like the California Hospital Association estimate the change could add billions of dollars in added interest costs for hospital construction. And the California Housing Consortium said the change could cut the number of affordable housing units built in the state by two-thirds each year.

National Consequence: The Nation’s Debt

Opposition to either bill is growing – not only because of the harm it would do to the SALT deduction or the use of municipal bonds – but because it would increase the national debt by $1.5 trillion over ten years. According to the Congressional Budget Office (CBO), the Senate bill would have a significant negative impact on families with household incomes of less than $30,000 per year almost immediately. And this opposition is coming from organizations that generally would support new tax policy if it was paid for and would contribute to economic growth.

Among the most vocal groups are the nonpartisan Committee for a Responsible Federal Budget (CRFB) and the nonpartisan Tax Policy Center, each of which has published reports and issued press releases that call into question many of the assumptions in both versions. CRFB has repeatedly criticized both the House and Senate tax cut proposals because they would substantially add to the nation’s debt.

The Senate Bill

Regarding the Senate version, CRFB wrote that:

  • There is no theoretical basis to suggest tax cuts could be self-financing. To do that, the economy would need to grow by $5 to $6 for every $1 of tax cuts.
  • There is broad consensus among economic models that future tax cuts won’t pay for themselves. Some models find tax cuts would be partially self-financing, while others find the economic feedback would actually increase the deficit effect of tax cuts.
  • Past tax cuts in 1981 and the early 2000s have led to widening budget deficits and lower revenue, not the reverse as some claim.
 The House Bill

Even with the use of dynamic scoring, the Tax Policy Center found that economic growth would be about .03 percent more than it would be without the tax cuts. Thus, it would have a much smaller impact on the gross domestic product (GDP) than has been claimed by Congress and the administration. Notwithstanding economic growth, this legislation would contribute about $1.4 trillion to the national debt and improve the overall economy by only a few tenths of a point. (Dynamic scoring attempts to predict the impact of federal policy changes on households and businesses and how that will contribute to economic growth.)

Reduced Revenues Will Mean Less Money for Programs

Moreover, we must not forget that we face efforts to significantly reduce non-defense discretionary (NDD) programs. Transportation, workforce training, public health, economic development, and other NDD programs are being threatened with further cuts that would irreparably harm these federally-sponsored programs. At the same time, defense discretionary spending is targeted for substantial increases in funding. The loss of $1.5 trillion in federal revenues over ten years could only serve to exacerbate this push to reduce non-defense discretionary spending, which in turn would directly impact the people you represent and serve.

Take Action

If we want to protect the interests of cities, counties, and regions, it is imperative that we influence Congress to maintain the SALT deduction, remove limitations on the tax-exempt status of municipal bonds, and restore the tax-exempt status of PABs. Failure to do so would substantially impact the ability of localities to meet their mandates and provide the services we all have come to expect.

If we want to prevent unnecessary increases to the national debt (~ $1.5 trillion) and the potential for even more cuts to NDD programs, than we must convince Congress and the president that neither the House nor Senate bills are the right vehicle to address perceived problems with the tax code.

Join NARC, NACo, and the National League of Cities (NLC) in opposing the specific changes to tax deductibility and municipal bonds that the House and Senate have proposed.

 

NARC Federal Budget Call Recap: Where We Are Now and What to Expect in the Fall

Senators and representatives may be home for recess, but the issues they left in Washington will be here when they return on September 5. Not only will the issues be here, but the urgency to address them will have increased significantly.

Top issues that await them include: the adoption of a federal budget, 12 appropriations bills, legislation to raise the debt ceiling, and tax reform. It is also possible that health care legislation may come up for consideration again.

This is why NARC felt it was important to host a conference call last Wednesday on the current status of the federal budget with Deborah Cox, legislative director at the National Association of Counties (NACo); Michael Wallace, program director of federal advocacy at the National League of Cities (NLC); and NARC staff. We wanted to provide you, our members, with an update on where these urgent issues stand so that you can better understand how these legislative items may impact your regions, counties, cities, and towns. We also wanted to provide you with information on how to educate your representatives and senators about the impact their decisions are likely to have on your regions and, especially, the people who live there.

Here is what you need to know:

  • Congress is faced with three important legislative deadlines in September.
  • Adoption of the 12 FY 2018 appropriations bills.
  • Passage of legislation that raises the debt ceiling.
  • Adoption of a FY 2018 budget that will pave the road for tax reform legislation.
  • The budget and appropriations process, as in years past, is behind schedule. Congressional leaders are scrambling to adopt some type of comprehensive appropriations bill by the end of September to keep the government open. More than likely, Congress will be forced to pass a temporary continuing resolution through mid-December.
  • The final appropriations bills will not be adopted until later this year or early next year. It is likely an omnibus bill incorporating all 12 appropriations bills into a single bill will be passed. The omnibus bill is expected to increase defense spending substantially while cutting some non-defense discretionary funding.
  • When appropriations legislation is bipartisan, cities, counties, and regions benefit much more. Right now, the process is very partisan and the impact on cities, counties, and regions is not likely to be positive. However, it is likely that Republicans will need Democrats to pass any omnibus appropriations bill. This will help the process become bipartisan, possibly yielding a positive outcome.
  • Legislation that permits the Treasury to borrow funds to pay the government’s bills (commonly referred to as “raising the debt ceiling”) must be passed by September 29, or there is the risk that the federal government will not be able to pay its bills. This may cause the United States to default on its debt, forcing the federal government to shut down.
  • If Congress is to move forward with tax reform, it will need to adopt a FY 2018 budget. This will provide direction on how to move forward and give the Senate authority to adopt tax reform legislation with a simple majority (51 votes) rather than a super majority (60 votes).
  • Senators and representatives drafting tax reform legislation are seriously considering eliminating the state and local tax deduction and the tax-exempt status for municipal bonds to pay for massive tax cuts.
Appropriations Specifics

NACo, NLC, and NARC staff shared that while the president proposed to eliminate funding for the weatherization assistance program, the House and Senate would fund the program at FY 2017 levels ($211.6 million). The Community Development Block Grant (CDBG), which the president zeroed out, would be funded by the Senate at current levels and by the House at $2.9 billion, just $100 million below current levels. For the HOME Investment Partnerships Program (HOME), which the president sought to eliminate, the House would cut funding by $100 million to $850 million. Transportation Investment Generating Economic Recovery (TIGER) grant program, which the president and the House wanted to eliminate, would be funded by the Senate at 10 percent over current levels to $550 million. Another program on the president’s list to cut drastically was New Starts, which would be funded by the House at $1.75 million and by the Senate by $2.13 billion. The Low-Income Home Energy Assistance Program (LIHEAP), which would have been eliminated had the president prevailed, would be maintained by the House at current levels ($3.4 billion). Finally, while the president would have reduced funding for workforce development programs by $1.3 billion, these programs would be cut by the House by only $300 million.

More specific funding information is provided in the table below.

[table id=2 /]

What Can Regions Do?

Speaking with your representatives and senators is critical. Underline the importance of these programs and how funding cuts would impact your programs and constituents. Another option that sends a strong message to congressional leadership is to send letters and op-eds to your local papers about the impact these cuts will have.

There are multiple ways you can educate your senators and representatives on federal budget issues:

  • Set up a meeting with your representative(s) while they are in their home district.
  • Invite your local representative(s) to attend one of your regional or coalition meetings.
  • Encourage them to visit a site financed by federal funds to highlight what is being achieved and why continuous funding is essential.
  • Bring stakeholders together and invite your representative(s) to see the faces of those impacted by programs funded by the federal budget.

Every effort you take to reach out to your representatives and senators while they are in your regions will have an impact, and ultimately, make a difference. And at a time like this, when programs are on the chopping block and Congress wants to cut domestic spending in favor of defense spending, there is no greater time to get involved.

NARC will release a larger, more expansive guide to educating your members of Congress, which we will share with membership.

Please note that NARC plans on holding these budget calls approximately once each month for as long as they are necessary. Look for emails announcing these calls as the details become available. If you have not yet joined us for one of these calls, now is your chance.

NARC would like to thank Deborah Cox, Legislative Director at NACo, and Michael Wallace, Program Director for Federal Advocacy at NLC, for their presentations during the call. For more information, please contact Maci Hurley at maci.hurley@narc.org or Neil Bomberg at neil@narc.org.

Additional Resources Mentioned on the Call include:

NARC’s Notes from the Appropriations Call

NARC’s Newsletter: eRegions

NARC’s Newsletter: Transportation Thursdays

NARC’s Blog: Regions Lead

NLC’s Fight the Cuts Advocacy Toolkit

NLC’s FY 2018 Budget Tracker

NACo’s Summer Advocacy Toolkit

NACo’s One Pager on State and Local Tax Deduction

NACo’s Municipal Bonds Toolkit

Governor Finance Officers Association’s Report: The Impact of Eliminating the State and Local Tax Deduction

The Federal Budget and Appropriations Process: in Limbo

It’s stuck because neither the House nor Senate has passed a budget plan that outlines spending for fiscal year (FY) 2018.

Why is it stuck?

Because the majorities in both chambers cannot agree on how much to spend on defense and non-defense programs. Moderate Republicans are concerned that a budget plan similar to the ones proposed by the president or the House speaker would make it very difficult for the House or Senate to maintain spending at current levels, let alone increase spending where consensus to increase spending existed. Conservative Republicans are pushing hard to substantially reduce spending for non-defense discretionary programs and substantially increase spending for defense discretionary programs, and want to break down the current spending caps that ensure that whatever gains or losses in spending occur are equally shared by defense and non-defense programs.

What does this mean?

It means that as we get closer to the September 30th deadline for passing a FY 2018 appropriations bills, the likelihood that Congress will yet again have to rely on a continuing resolution or omnibus appropriations bill to fund the federal government increases substantially. It also means that the chances of a government shutdown will increase.

Why is this happening?

This is happening because the Senate’s failure to pass legislation to repeal and replace the Affordable Care Act (ACA) has upended the carefully planned schedule that the Senate Majority Leader Mitch McConnell (R-KY) developed for passage of a broad range of bills, including a federal debt ceiling increase, tax reform, appropriations, and several reauthorization bills.

According to Bloomberg Government, Senator McConnell was hoping to bring up a measure to raise the federal debt limit, and push through a U.S. Department of Defense bill with large spending increases for the Pentagon in July. At the same time, McConnell was also hoping to use the work period to ensure the timely renewal of many expiring federal programs. Until the Senate adopts a budget resolution; however, it will not be able to move forward with tax reform legislation that relies on reconciliation. Under reconciliation the majority needs just 51 votes, rather than the usual 60 votes, to pass legislation. If the Senate cannot pass either health care or tax reform legislation sometime in July or early September (remember they are out for a break in August), the likelihood of passing any tax or health care legislation this calendar year will further diminish, and the series of major legislative promises made by the president will go unfulfilled.

So where do we go from here?

It is very hard to know. Certainly, Senator McConnell is a master of legislative rules and procedures, and if anyone can move things through the Senate it is he.  But the limited amount of time before the end of the fiscal year does not bode well for Republicans.

Senator John Cornyn (R-TX) acknowledged these difficulties when he told reporters that “it doesn’t get any better, it doesn’t get any easier. We’ve got other things we need to do, like the defense authorization bill. We need to get ready to pass another budget so we can get reconciliation instructions for tax reform.”

The next several months should prove interesting. Depending on how this all turns out, the losers and winners will be neither Republicans nor Democrats, not even Independents. It will be the American people. We will just have to stay tuned and hope that someone, somehow will develop a strategy for moving legislation forward.

Where Do Job Programs Stand in the Face of Potential Labor Department Cuts?

On Tuesday, June 27, 2017, the Senate Appropriations Subcommittee on Labor, Health and Human Services, and Education (Labor/H) held a hearing at which the current Labor secretary, R. Alexander Acosta, testified on the president’s budget and other matters.

While the conversation often strayed in various directions, including worker safety, foreign workers, public safety, and worker layoffs, it ultimately returned to jobs, and the clear belief by most members of the subcommittee that putting Americans to work requires a robust and effective workforce development system. For members of the subcommittee it did not matter whether these unemployed or underemployed workers were coal miners from West Virginia, young black men from Chicago, or workers who lost their jobs because of outsourcing. Ultimately, the conversation always came back to the need for and the importance of jobs, job training and job placement programs.

Chairman Roy Blunt (R-MO) opened the hearing by bemoaning the fact that the administration was proposing to cut the Labor Department’s budget by $2.3 billion or 20 percent. He added that while he supports efforts to reduce federal expenditures overall, he wondered aloud whether these Labor Department cuts make sense. If adopted the president’s budget would cut 40 percent of the Labor Department’s workforce development budget. In turn, that would mean that 40 percent of state funding for job training and placement services would vanish, and place individuals and their families at risk for unemployment and a significant loss of income.

Senator Patty Murray (D-WA), the ranking member, echoed Chairman Blunt’s concerns, but added this criticism (and I paraphrase):

The president’s budget request is deeply harmful. It will make it extremely difficult to continue to connect workers to jobs – which is, of course, the central mission of the Department of Labor. Our ability to keep good jobs in America will only be realized by tapping into the full potential of our workers. This budget disregards the bipartisan Workforce Innovation and Opportunity Act, which Republicans and Democrats worked on to ensure an effective federal, state, and local job training system. In fact, nine million of the 20 million who are served by this program will be denied training and connections to the workplace. We need robust investments that help workers and state and local officials grow our economy and get to work, and not the deep cuts proposed by the administration.

Secretary Acosta did not shy away from the debate. In the face of significant criticism from senators on both sides of the aisle, Acosta made clear that the president’s vision for America is “good and safe jobs for all Americans.” He noted that while unemployment is very low – about 4.3 percent – some six million jobs remain unfilled. He went on to say that we have to train Americans to fill those jobs if we are to remain a strong and vibrant nation, and often the best way to train people for these jobs is through apprenticeship programs.

“The answer, according to the president,” Acosta said, “is to expand apprenticeships. High quality apprenticeships ensure that workers have the appropriate skills and ensure that they can earn a decent income.” He pointed out that post apprenticeship starting salaries can top $60,000. “That’s more than the average starting salary for a college graduate,” he added.

When queried about the cuts to existing programs, Acosta said there are many programs – some that are duplicative, and some that have not proven their value – that need to be eliminated, consolidated, or changed. “The department is using rigorous standards to determine what works and what does not, and those standards will form the basis for our judgments about which programs should continue and which should not, which should be funded and which should not.”

Despite the back and forth, an interesting admission emerged at the end from the secretary. Acosta said that the president’s budget is only a starting point, and that the administration and he are looking forward to working with Congress to hammer out an appropriate budget for the Labor Department. Where that will lead remains to be seen.

President’s FY18 “A New Foundation for American Greatness” Budget Not Great for Local Governments

On Tuesday, May 23, the president introduced his first ever, full budget proposal: A New Foundation for American Greatness. If adopted into law, the budget would impose catastrophic cuts to non-defense discretionary programs (those most targeted to local programs), while dramatically increasing spending for defense-related programs.

If you believe that the greatness of a nation is measured by the vitality of its communities and the well being of its citizens than this budget does not meet its goal as a new foundation for American greatness. Instead, it is a budget that will continue the “war” against communities, economically disadvantaged people, and programs that are important to local governments everywhere.

Let’s begin with the big picture. If adopted, this budget would cut $54 billion from programs designed to meet human needs in fiscal year 2018, and $1.4 trillion over 10 years. These include transportation, workforce development, economic development programs, community and economic development, housing, aging, clean water and air, youth and other so-called non-defense discretionary programs. The $1 trillion over 10 years infrastructure program promised during the campaign would be reduced to $200 billion over 10 years with much of the investments coming from the private sector through public-private partnerships.

Fiscal year 2018’s  $54 billion in “savings” would be appropriated to defense, resulting in a 10 percent increase in overall defense spending in fiscal year 2018 and a $469 billion increase over 10 years.

Departments like the Environmental Protection Agency would be cut by $2.6 billion or 31 percent as compared to fiscal year 2017; Labor would be cut by $2.5 billion or 21 percent; Health and Human Services by $7.8 billion or 16 percent; Commerce (including the Economic Development Administration) by $1.5 billion or 16 percent; Transportation by $2.4 billion or 13 percent; Housing and Urban Development by $4.3 billion or 12 percent; and Energy by $1.7 billion or 6 percent.

Moreover, nothing has changed since the president’s “skinny budget” was released.

Under the president’s full budget proposal, funding for:

  • CDBG, the HOME Investment Partnerships Program, Choice Neighborhoods and the Self-help Home Ownership Opportunity Program would be eliminated;
  • Workforce development programs would be cut;
  • “New Start” and TIGER Transportation programs would be eliminated or substantially reduced, respectively;
  • Programs focused on climate change, water quality, and chemical safety, and “safe and sustainable water resources,” would be substantially reduced;
  • Low Income Home Energy Assistance Program (LIHEAP) and the Community Services Block Grant (CSBG) would end; and
  • Federal support for job training and employment service formula grants would be substantially reduced so that state, localities and employers would accept the costs for workforce training and development.

The question that is often asked is whether federal spending is sustainable. The question that may need to be asked now is whether these cuts are sustainable. Tens of millions of people will be directly impacted by these and other cuts (last year 23 million households received assistance to pay for heating and cooling through LIHEAP and millions received assistance to achieve their workforce goals). And if these cuts are approved, regions across the nation will find that the resources they and their cities and counties need to do the work they do will dry up.

This budget is everything but a new foundation for American greatness.

Review the president’s budget proposal to learn more.

President’s Tax Plan Leaves Out Infrastructure

As you have no doubt heard by now, the Trump administration yesterday released a tax reform “plan” that filled just one side of a single sheet of paper. Which is to say, the plan is light on details. The “goals for tax reform” are outlined:

  • “Grow the economy and create millions of jobs
  • Simplify our burdensome tax code
  • Provide tax relief to American families – especially middle-income families
  • Lower the business tax rate from one of the highest in the world to one of the lowest”

Some of the specifics include reducing the number of tax brackets, doubling the standard deduction while eliminating a number of itemized deductions (but preserving the deductibility of mortgage interest and charitable gifts), repealing the inheritance tax and alternative minimum tax, reducing the corporate rate to 15%, and switching to a territorial system of taxation for corporations.

Aside from the elimination of some tax deductions, the only other offset mentioned is a one-time tax on overseas earnings, or repatriation. This is notable if you care about infrastructure. The repatriation funding has long been considered the primary way to pay for a significant infrastructure investment. Even the president has mentioned this possibility in the past. With some $2.3 trillion parked overseas, a 10% tax could bring in hundreds of billions of dollars. But the new plan does not specifically tie repatriation to infrastructure, at least not at the outset.

Rep. John Delaney (D-MD), who has introduced bi-partisan legislation that would use repatriated funds specifically for infrastructure, called yesterday’s announcement a “punch in the gut.” His release on the tax plan states: “Strategically, this is a strong sign by President Trump that they’re not serious about infrastructure, it’s a punch in the gut on infrastructure, frankly. Today the White House essentially announced they aren’t doing infrastructure. After working on this issue for four years, it is clear to me that the only way you can pay for a real infrastructure program is by using revenues from repatriation.”

There is still a long path from here to passage of a tax package. But as a first draft, yesterday’s proposal would result in massive increases in the federal deficit and potentially make a large infrastructure package next to impossible. Let’s hope there’s more here than meets the eye, and that the president remains committed to ensuring we invest in the nation’s infrastructure as a major part of his economic plan.

Want America to Be ‘Great’ Again? Pay For It – By Pat Jones, IBTTA

The following article, Want America to be Great Again? Pay for It, by Pat Jones was originally published as a guest editorial in the April 18 issue of Time magazine. Pat Jones is the CEO of the International Bridge, Tunnel, and Turnpike Association (IBTTA), an organization that represents tolling agencies from around the nation and world. His organization has been at the forefront of advocating for increased resources to maintain our roads, bridges and tunnels, and other infrastructure. This blog argues for a coherent, thoughtful transportation policy that provides the necessary funds to ensure that America’s roads and bridges, and other infrastructure, are properly maintained. Most recently, Mr. Jones was a general session speaker at NARC’s  2017 National Conference of Regions.

Elon Musk recently announced that he is fed up with traffic in Los Angeles and will soon begin boring a tunnel under the city to relieve congestion. As a billionaire and innovator, Musk has the resources to make something like this happen. But even if he bores his tunnel, where does that leave the rest of the country with its congested highways, crumbling bridges, aging water systems and fragile power grid? One big push in L.A. doesn’t solve the problems of an entire country struggling under the burden of billions of dollars in deferred maintenance. We need a national vision to pay for and revitalize our infrastructure for all Americans.

For decades, my association (IBTTA) and many others have urged Congress and the states to make much bigger investments in our vital infrastructure. But we are still far behind where we would like to be. The problem is us. We say we want better roads and safer drinking water. But year after year, we refuse to come up with the money to make the big improvements that we need. Yes, some states and local governments have taken it upon themselves to raise revenue. But that isn’t enough to meet all our infrastructure needs.

But there is hope. President Donald Trump has shined a bright light on infrastructure. During the campaign, his inaugural address – and most recently, his Joint Address to Congress – he emphasized his commitment to rebuild roads, bridges and schools. Last October, his advisors published a paper that proposed $1 trillion in new infrastructure investment over ten years by offering tax credits to private investors. And recently, Senate Democrats introduced their own $1 trillion plan to repair crumbling roads, rebuild schools and do more while creating over 15 million new jobs.

As hopeful as these proposals are, there is a big problem: They are heavy on vision and light on details, specifically how to pay for them. Paying for a grand plan is always the sticking point. Those who advance these proposals don’t want to talk about “pay-fors” until the last minute, because they want to limit the opportunity of their adversaries to oppose them. So, we get the big vision first in the light of day, and the messy sausage-making of pay-fors in the dead of night.

And who’s to blame for this? The American people. It may seem that Congress and the President are pursuing wicked ends through clandestine means when they wrap up a deal with pay-fors at the eleventh hour. But they are simply following our lead.

Consider this reader comment in response to a recent newspaper article describing Americans’ reluctance to pay user fees to rebuild infrastructure. The reader said, “Americans want first class roads but don’t want to pay for them. Well, folks, nothing is free. No one will provide these things without taxes or user fees.”

In response to this attitude, Congress and the President have twisted themselves into unnatural shapes to say to voters, “Yes, we’re going to rebuild your infrastructure,” and “No, we’re not going to raise taxes or fees to do it (well, maybe just a little).”

This Harry Houdini act must end. We can’t rebuild our infrastructure if our elected leaders are forced to carry out our will wrapped in a straitjacket and submerged in a glass coffin rapidly filling with water. This tableau makes for great theater but lousy public policy.

Having a grand infrastructure proposal without a means to pay for it doesn’t solve the problem. It merely names the problem and a happy end state, without any of the hard work needed to get to the end. We need to be honest with each other and make sacrifices now to ensure a better future. Sacrifice in this case means money, with Americans paying more than they pay today in exchange for better infrastructure.

It’s time to treat the American people like adults and explain the need for bigger investment in the form of taxes and user fees. Adults understand that there is no free lunch and there are no free roads. Let’s have an honest conversation that starts like this: We are going to build and maintain the finest infrastructure in the world and we, the American people, are going to pay for it.