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Week Ending March 7, 2014

President Submits Growth and Opportunity Budget

President Obama submitted to Congress a Fiscal Year 2015 federal budget that conforms to the low-spending limits previously established by Congress but also calls for new investments to create jobs, expand opportunity, and fight inequality. A new $56 billion “Opportunity, Growth, and Security Initiative” is evenly divided between defense and domestic services and paid for by closing tax loopholes and spending reductions. Domestic investments include a $302 billion infrastructure proposal and new funding for early childhood education, job training, an expansion of a home-visiting program for at-risk children, and state paid leave programs.

The president’s plan also calls for an expansion of the Earned Income Tax Credit, an increase in the minimum wage, and continuation of emergency unemployment benefits. In addition, it rejects any cuts to Social Security benefits by the adoption of the so-called “chained” Consumer Product Index (CPI) although proposals to shift Medicare costs to beneficiaries included in last year’s budget reappear in this one. The budget would eliminate the mandatory across-the-board budget cuts, known as sequestration, starting in 2015 and reduce the deficit by $2 trillion over the next decade.

AFSCME’s President Lee Saunders said President Obama’s budget “sets the right priorities for the country at this time, and it recognizes that the country sorely needs new investments in education, child care, job training and infrastructure.”

Highlights of the president’s budget are set forth below:

  • Revenues

    The president’s tax proposals would raise more than $1 trillion over 10 years by closing individual and corporate tax loopholes and boosting estate and gift taxes on America’s wealthiest individuals. The plan would reduce incentives for large corporations to send jobs and profits overseas, but it unwisely calls for reducing the top corporate tax rate. During the short-term transition to a new tax system, the plan would raise $150 billion to fund one-time investments in transportation infrastructure, which AFSCME supports. The plan closes many other corporate tax loopholes and would raise $56 billion over 10 years with a Financial Crisis Responsibility Fee that would tax big financial institutions with assets exceeding $50 billion. To help working families, it extends the Earned Income Tax Credit to childless workers, expands the Child and Dependent Care Credit, and reduces tax burdens relating to student loan forgiveness and Pell Grants.

  • Workforce Programs

    The Department of Labor’s (DOL) budget request shows that if funding had to fit within the current congressional spending limits, the main state formula grant programs, including the Workforce Investment Act (WIA) adult, dislocated worker and youth programs, and state Wagner-Peyser grants, would have to remain at the same funding level. With unemployment insurance claims projected to continue dropping, the budget also reduces state grants to administer the unemployment insurance (UI) program by approximately $104 million. In one important exception, however, there is a major increase from $80 million to $157 million for reemployment assessments and reemployment services that would be provided to unemployment insurance claimants by state unemployment insurance or employment service staff.

    The DOL request also recommends major new job training investments. They include several competitive grant programs with a combined total of $10 billion that would dwarf existing programs. They would establish competitive grants to support a variety of training partnerships among community colleges, public and non-profit training entities, and employers. A total of $750 million also is requested to restore prior cuts to the WIA job training and employment services formula grant programs.

    The DOL budget also requests $2 billion to encourage states to set up Bridge to Work programs under which UI claimants could engage in short-term employment while continuing to receive their UI benefits. AFSCME has opposed previous Budget to Work proposals that would have converted the UI benefit into a wage subsidy, but the budget documents do not specify how these new initiatives would be structured.

    Finally, the president’s budget proposes to consolidate the Trade Adjustment Assistance (TAA) program with the WIA dislocated worker program and fold the current TAA community college training program into one of the new competitive grant programs. Labor has opposed these consolidation proposals in the past out of concern that the benefits and training services provided to workers displaced by offshoring of jobs would be diluted and that the public delivery system in the TAA program would be replaced with private contractors.

  • Medicare and Medicaid

    President Obama’s budget saves $407.2 billion in the Medicare program over 10 years, mostly by reducing prescription drug costs and closing the Part D coverage gap (known as the donut-hole) sooner. Unfortunately, like last year, the budget also proposes increasing income-related premiums for Medicare beneficiaries, which AFSCME opposes. Under the proposal, more beneficiaries would pay over time until one in four beneficiaries pay higher premiums. We are concerned that this proposal will hurt beneficiaries of modest means and undermine Medicare as an earned social insurance program. This proposal will cost beneficiaries $52 billion over 10 years.

    In Medicaid, the budget extends the current $3.6 billion cuts to public safety net hospitals for another year. It also proposes $75 million to provide home and community based care to children currently eligible for psychiatric residential treatment facilities, which would result in nearly $2 billion more for home care services over 10 years. The budget also would continue the express lane eligibility option permanently, costing $1.1 billion over 10 years and proposes to extend increased federal funds to help pay for Medicaid primary care providers by an additional year.

  • Education

    Similar to last year, The president’s FY 2015 flat-funds most education formula grant programs to the states, including Title I funding for students in low-income areas and the Successful, Safe and Healthy Students, a new program to replace Safe and Drug-Free Schools.

    However, the budget also includes significant increases for early care and education, including a $75 billion proposal for quality preschool for all 4-year-olds. Head Start would receive a combined increase of $1.07 billion which includes $950 million earmarked for the new Early Head Start-Child Care Partnerships. The Child Care and Development Block Grant (CCDGB) would receive an additional $807 million, the preschool development grants would be increased from $250 million to $750 million and IDEA state grants for special education would receive an additional $100 million. The budget proposes $300 million for a new competitive grant program, Race to the Top-Equity and Opportunity, focused on closing the achievement gap in the highest poverty schools.

  • SNAP, Child Nutrition, and WIC

    The president's budget restores a cut to monthly Supplemental Nutrition Assistance Program (SNAP) benefits made in November 2013, but does little to offset SNAP cuts approved as part of the recently enacted Farm bill. The budget adds no new funds to child nutrition, but strengthens and expands children’s access to healthy meals and snacks through continued implementation of the Healthy, Hunger-Free Kids Act of 2010 and provides funding to support the 9.1 million individuals expected to participate in the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) program.

  • State and Local Law Enforcement Assistance

    The president’s budget requests a $60 million increase to $274 million for the Community Oriented Policing Services (COPS) program, and another $247 million for the COPS Hiring program to assist state and local governments in hiring and training community policing professionals. The budget recommends $376 million for Byrne-JAG, including $22.5 million for the matching grant program for bulletproof vests and $319 million for the Byrne-JAG formula grant program ($25 million decrease from the previous year). The Byrne-JAG program awards grants to state and local governments for a broad range of crime prevention and control activities. An additional $15 million is requested for Byrne Incentive Grants, a new program to provide additional grants to JAG recipients who choose to use a portion of their JAG funding to support evidence- or data-based activities, or to support recent innovations that can be readily evaluated for effectiveness.

  • Child Support Enforcement

    The budget asks for $3.7 billion for Child Support Enforcement and Family Support Programs, including funding to modernize the Child Support program and to promote responsible fatherhood. The budget also includes a set of proposals to encourage states to pay child support collections to families rather than retaining those payments. This effort includes a proposal to encourage states to provide all current monthly child support collections to Temporary Assistance for Needy Families (TANF) recipients.

  • Additional Programs

    The president’s budget also recommends:

    • $2.8 billion for home heating and cooling assistance, a cut from FY 2013 funding of $3.255 billion.
    • A 50% cut in Community Action Funds that support the administration of many important anti-poverty programs, such as Head Start, emergency food, job training and weatherization.
    • $2.3 billion for the Ryan White HIV/AIDS Program, which serves over half a million low-income people with HIV/AIDS annually.
    • Level funding for TANF funding at $17.4 billion.

Congressional Action on the Budget

Congress is expected to begin consideration of its own budget plan as GOP leaders dismissed the Obama plan out of hand. House Budget Committee Chairman Paul Ryan (R-WI) is formulating his own budget plan that is likely to pass the House. Senate Budget Chair Patty Murray (D-WA) has indicated she does not intend to draft a new Senate budget plan since the recently approved budget agreement included a two-year budget.

More Unemployed Workers Lose Unemployment Insurance Benefits (UI) as UI Legislation Remains Stuck in the Senate.

The number of long-term unemployed Americans who have dropped from the federal Emergency Unemployment Compensation (EUC) program reached the two million mark this week and will continue to climb to 2.3 million by April 5 if Congress does not act. The Senate failed to take another vote on the issue this week, an indication that Senate Majority Leader Harry Reid (D-RI) still had not secured enough GOP leader votes to overcome a procedural objection to considering the legislation. AFSCME and other advocates have been working to persuade Sens. Mark Kirk (R-IL) and Rob Portman (R-OH) to support extending UI benefits. And, there is some reason to believe our work is having an impact. Late this week, a group of GOP senators were reported to be working on a five month extension. In the meantime Sen. Jack Reed (D-RI) introduced a new bill (S. 2077) this week that would continue the EUC program for six months. Even if the Senate is able to pass legislation, getting it through the House of Representatives will be difficult.  

Consumers and Taxpayers would Save Billions if Medicare Negotiated Prescription Drug Prices

A new report by the Center for Economic and Policy Research looks at the savings that other countries achieve by negotiating with pharmaceutical companies over the price of prescription drugs paid for by government-sponsored health care programs. If Medicare were allowed to negotiate drug prices, the experience in countries like Canada indicates that the federal government would save at least $230 billion over ten years. In addition, states would save at least $31 billion and consumers would save at least $48 billion. 

While current law prohibits Medicare from negotiating with pharmaceutical companies, it is a standard business practice among insurance companies and other businesses that purchase drugs. Moreover, the Veterans Administration bargains over prices for drugs used to care for veterans. The need to end this sweetheart deal for the drug industry was referenced by President Obama during his recent State of the Union address. Recently, Sen. Amy Klobuchar (D-MN) introduced S. 117 and Sen. Al Franken (D-MN) introduced S. 77, bills that direct the Medicare program to negotiate prescription drug prices. AFSCME supports both bills. 

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