Week Ending February 18, 2011
House Considering Draconian Funding Bill; Threat of Government Shutdown
As of press time, the Republican-controlled House of Representatives was still wading through more than 500 amendments to its irresponsible, partisan, and draconian funding bill (H.R. 1) for the remaining seven months of the 2011 fiscal year. It contains about $64 billion in cuts (13.8%) from current spending levels for non-defense discretionary funding. These reductions in spending for important investments will slow down our nation’s economic recovery and result in the loss of approximately a million American jobs. State and local governments would be particularly hard-hit by the House bill because one-third of non-security discretionary spending grants are in the form of aid to state and local governments. H.R. 1 would have a devastating effect on the ability of state and local governments to deliver vital public services, and would result in significant public sector job losses.
Among the provisions that affect AFSCME members, the House bill would:
- Cut $2.5 billion from Community Development Block Grant formula funding, federal aid that goes directly to local governments;
- Cut $1.1 billion from Head Start programs, with projected layoffs of 55,000 staff, and 218,000 fewer children enrolled;
- Eliminate child care subsidies for 150,000 children;
- Cut as much as $1.7 billion from the Social Security Administration, which would force the SSA to cut more than 3,500 staff from its field offices, state disability determination services, and disability hearing offices, as well as likely furloughs for about 50,000 federal and state employees, causing serious delays in processing and payments;
- Cut a total of $1.2 billion (56%) from the Clean Water and Drinking Water State Revolving Funds, which would result in hundreds of fewer sewer and clean water projects and 33,600 fewer jobs;
- Cut $693.5 million from Title I for K-12 education;
- Cut $5.7 billion from Pell grants (24%), more than $800 per student;
- Cut $203 million for COPS program grants to pay for bulletproof vests and other law enforcement needs. An amendment restored funding for the COPS Hiring program, which had been eliminated in H.R. 1 as introduced;
- Cut the Byrne Justice Assistance Grant Program, which funds state and local law enforcement, by approximately $197 million (19%);
- Cut many programs that have received funding under the Affordable Care Act (health reform law), including a $1 billion funding reduction for community health centers;
- Cut $1.1 billion from the public housing capital fund (43%) and $149 million from public housing operating budgets;
- Cut $1.4 billion from the Centers for Disease Control, including $269 million cut from public health preparedness and response;
- Eliminate Workforce Investment Act (WIA) new enrollment in job training and force current participants to leave training, which would result in hundreds of workforce office closings and would deny up to eight million workers job training and employment services between July 1, 2011 and July 1, 2012;
- Cut $12.3 billion in transportation funding, which translates into over 340,000 jobs lost. This cut includes elimination of $1.1 billion in funding for grants and loans for surface transportation projects (the TIGER program) this fiscal year and the rescission of funding provided for the program in FY 2010;
- Cut $61 billion from the Securities and Exchange Commission (SEC), hampering its work monitoring hedge funds and derivatives and protecting investors.
The House vote is expected later today or Saturday. The fight for adequate federal spending will then move to the Senate, which will take up its spending bill in early March. Senate Democrats have expressed support for a five-year freeze of domestic discretionary spending proposed by President Obama. AFSCME will be advocating for a Senate bill that adequately funds vital services and programs, and that will protect and promote economic recovery and job growth.
A final bill will not emerge before March 4, when the current temporary spending bill expires, so a short-term measure to continue government spending will be needed. Talk of a possible government shutdown has intensified this week if an agreement on the funding bill cannot be reached.
House Will Likely Vote to Defund Health Reform
This week, House Republican leaders continued their assault on the Affordable Care Act. On Friday morning, an amendment to the FY 2011 spending bill was offered by Republican leaders to prohibit the expenditure of funds to implement the Affordable Health Care Act for the remainder of the fiscal year. While the amendment was debated, a vote on it was scheduled for later in the day. We anticipate that the vote will be along party lines, and that the amendment will be adopted.
If the measure were to become law, it would halt implementation of much of the law and take real benefits away from working families. For example, it would prevent the Administration from issuing implementation grants and guidance to states to establish state exchanges and it would prevent the Administration from distributing subsidies to employers who provide retiree coverage. It would also prevent enforcement of new patient protections, such as the new rule that prohibits insurance companies from dropping coverage when someone gets sick.
President Obama’s Proposed FY 2012 Budget: Important Investments and Revenue Increases During Difficult Budgetary Times
President Obama released his proposed FY 2012 budget on February 14 amidst an inflamed environment concerning federal government spending. While it does not propose spending increases for some programs that would have been possible in a more favorable budgetary climate, it stands in stark contrast to the wanton budget slashing by Republican leaders during the House floor debate on the FY 2011 spending bill.
The budget’s five-year freeze on overall funding for non-security discretionary spending translates into cuts in some areas, some funding increases, and in others, flat funding. It rejects larger spending cuts that would halt the precarious economic recovery and needed job growth. It also cuts $78 billion from the Pentagon’s spending plan over the next five years, bringing spending down to zero real growth.
The budget also proposes policy changes that are important for AFSCME and working families. The President’s budget does not propose to cut or weaken Social Security.
Significantly, President Obama's proposal addresses the other side of the budget ledger, calling for increased revenues by curbing numerous tax loopholes and deductions that primarily benefit the wealthiest Americans and corporations.
Some Areas of Additional Spending:
Community Oriented Policing Services (COPS) Hiring: Proposes a $302 million increase, doubling funding for the COPS Hiring program targeted to state and local governments to hire 50,000 officers nationwide.
Bullet-Proof Vests: Proposes $30 million for the matching grant program for law enforcement armor vests.
Surface Transportation: Proposes a six-year surface transportation bill funded at $556 billion, which is a 60% increase over the previous six-year authorization.
National Infrastructure Bank: Proposes $5 billion a year over six years to create a new National Infrastructure Bank (I-Bank). The I-Bank would provide loans and grants for individual projects and broader activities of national and regional significance.
Health and Human Services/Education:
Education: Proposes to increase education funding by $13 billion - a 20.7% increase.
Child Care: Proposes an additional $1.3 billion for the Child Care and Development Block Grant (CCDBG).
Head Start: Proposes an additional $866 million.
Child Support Enforcement: Proposes to increase funding authorized for performance-based incentives by $300 million in both 2012 and 2013, although it does not restore the federal match for incentive payments that expired on September 30, 2010.
Paid Family Leave: Proposes $23 million to fund a pilot program to provide paid family leave in states, which has never been previously funded.
Community Health Centers: Proposes a $1.1 billion increase in funding.
Medicaid Eligibility Determinations: Includes $2.9 billion over 10 years to pay for an increase in the federal Medicaid match from 50% to 90% for development of new information technology systems and to 75% for their maintenance and operation.
Public Housing Operating Fund: Proposes a new request of $3.962 billion in addition to a $1 billion offset from Public Housing Agencies' (PHAs) existing Operating Fund reserves, for a total request of $4.962 billion. While the total proposed $4.962 billion would fund 100% of PHAs’ estimated operating costs, without the offset, the new request would cut the Operating Fund by about 20%.
Public Housing Capital Fund: Proposes to essentially flat-fund formula-based modernization capital grants at $2.365 billion. It cuts $50 million from, and proposes no dedicated funding for the Resident Opportunities and Supportive Services (ROSS) program, which would remain an eligible expense within the Operating Fund.
Some Areas of Proposed Spending Reductions:
Community Development Block Grant, Formula Grants: Proposes a $299 million cut for Community Development Block Grant (CDBG) formula grants, from $3.983 billion to $3.684 billion.
Community Services Block Grant, Non-Formula Grants: Proposes to cut funding in half, from $700 million to $350 million.
Secure Rural Schools: Proposes a five-year extension of the Secure Rural Schools and Communities Act (SRSCA), which provides temporary payments to counties impacted by the reduction of revenues stemming from lower levels of timber harvesting on federal lands. However, it would substantially reduce funding from current levels after FY 2012.
The budget proposes that various Bush-era tax cuts, for individuals and families earning more than $200,000/$250,000 a year, expire as scheduled on December 31, 2012. The budget proposes to cap upper income taxpayers’ itemized deductions at 28% -- returning the rate to Reagan-era levels – and to use these revenues for a three-year patch on the Alternative Minimum Tax (AMT), which would reduce the number of middle class taxpayers required to pay the AMT. The budget proposes to reinstate the estate tax’s 2009 rates and exemptions, thereby raising revenues and ensuring estates of approximately 99.7% of Americans will pay no estate taxes.
The budget also proposes to close various tax loopholes for large profitable corporations and industries, including oil and gas companies. It would require the largest financial institutions - with assets exceeding $50 billion – to pay a Financial Crisis Responsibility Fee to compensate for the assistance the federal government provided through the Troubled Asset Relief Program (TARP) and other supports. Over 10 years, the fee totals $30 billion. The budget asks Congress to work with the Administration to reform corporate taxes by simplifying the system, eliminating special interest tax loopholes, and using resulting savings to reduce corporate tax rates – all without increasing the deficit
Unemployment Insurance: Proposes to fully fund the unemployment insurance workload, but because the budget anticipates a continued decline in unemployment, state administrative dollars would drop by $492 million. The Administration will ask Congress to increase the federal taxable wage base from $7,000 to $15,000 in 2014, and to defer state interest payments on their loans from the Federal Unemployment Insurance Trust Fund, and to suspend state loan repayments for the next two years.
Transforming Rental Assistance: Proposes a new Transforming Rental Assistance (TRA) competitive demonstration program to facilitate voluntarily converting 255,000 public housing units and 8,000 other HUD-subsidized units into long-term project-based Section 8 contracts. TRA is designed to help PHAs leverage $6.1 billion in private financing for public housing and would cost $200 million. Obama’s proposed FY 2011 budget requested $350 million for a similar program, which was not enacted into law.
Republicans Continue to Attack State & Local Government Workers’ Pensions: Congressional Hearings & Legislation
On February 14, House Republicans convened a Judiciary subcommittee hearing tellingly titled, "The Role of Public Employee Pensions in Contributing to State Insolvency and the Possibility of a State Bankruptcy Chapter,” and designed to undermine state and local government workers’ pensions. Ranking Democrat Hank Johnson (GA) said it also appeared top Republicans were trying to paint public-sector unions negatively. House Judiciary Committee Chairman Lamar Smith (R-TX) wrongly asserted, “states, through collective bargaining with unions, have promised fixed payouts to their retired public employees without requiring any employee contribution.” In fact, many states require employee contributions. Furthermore, in 2010, 11 different states both increased employee contributions and decreased employee benefits, and seven of these states increased employee contributions from both active employees and future employees.
Republicans used the hearing to repeat false claims that states’ cumulative unfunded pension liabilities exceed $3 trillion and state and local pension obligations are the main cause of state and local budget problems. In contrast, witness Keith Brainard, National Association of State Retirement Administrators, testified that in 2009, state and local spending on public pensions as a percentage of their overall spending was only 2.9%. Interestingly, key Republicans voiced opposition to permitting state bankruptcy. Chairman Smith said, “there are constitutional and policy concerns with this approach. Congress should not hinder restructuring efforts at the state level by passing laws that make it more expensive for states to access capital in the bond market during a recession.” House Judiciary Subcommittee Chairman Howard Coble (R-NC) succinctly stated, "I see all sorts of snakes coming out of that pit."
In related action, six Republican Senators introduced the “Public Employee Pension Transparency Act” (PEPTA) (S. 347), which mandates new, inappropriate federal reporting requirements on state and local pension plans. If retirement systems file inadequate reports, PEPTA penalizes states and/or localities associated with these plans by rescinding existing federal tax benefits related to state and local bonds.
Aviation Bill Advances
During a late night session on February 17, the Senate approved the Federal Aviation Administration (FAA) authorization bill (S. 223), legislation that would modernize the air traffic control system, improve the safety, reliability and availability of air transportation, and fund the FAA. After more than two weeks of debate, the measure was approved by a vote of 87 to 8.
One day earlier, the House Transportation and Infrastructure Committee (T&I) approved its version of the aviation reauthorization bill (H.R. 658) by a vote of 34-25. Unfortunately the T&I Committee bill contains numerous anti-labor provisions. Committee Democrats introduced several amendments to rid the bill of these provisions, but were voted down by the Republican-controlled Committee.
The last FAA reauthorization expired in 2007, and there have been 17 extensions since that time.
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