July 27, 2012
As the highly contorted farm bill process continues to unfold, Congress is simultaneously working in abnormal ways to address important budget and appropriations matters. Neither the full House nor the full Senate has yet to pass an agriculture appropriations bill for FY 2013. Both chambers did, however, begin to address the looming matter of budget sequestration, which is set to trigger automatic spending cuts beginning in January 2013.
On Wednesday, July 25, the Senate passed a bill to require the Obama Administration to outline the cuts that budget sequestration will make to programs across administrative agencies, including the Department of Agriculture. The House passed a companion bill on July 18, meaning that the bill will now go to the President for his signature.
Budget sequestration consists of across the board cuts, evenly split between defense and non-defense spending, and spread over nine years. Cuts are allocated across discretionary and mandatory spending programs, though some mandatory programs are exempted. If sequestration were to take place, nearly $110 billion would be cut each year from FY 2013 through FY 2021. The process is set to kick in on January 2, 2013 and is the result of the collapse of the Joint Select Committee on Deficit Reduction (also known as the “Supercommittee”), which failed to produce a deficit reduction plan last year.
While the Congressional Budget Office (CBO) has estimated the impacts of sequestration, the final distribution of the cuts is left to the Administration’s Office of Management and Budget (OMB). OMB has repeatedly said that it needs more time to analyze the sequestration mechanism before it can release its list of cuts. After nearly a full year, that excuse is getting old. The bill is intended to force OMB’s hand.
When and if the Administration finally releases the numbers, expect the already heated lobbying to get Congress to de-trigger sequestration to intensify. There is an increasing expectation that Congress will revoke or modify sequestration during the lame duck session of Congress after the November elections, but that is far from a certainty.
If sequestration is not de-triggered and if Congress has not approved a 2012 Farm Bill by the end of the year, it is expected that farm bill programs, with the exception of SNAP (food stamps) and the Conservation Reserve Program, will be cut by some $15 to $16 billion, distributed over the course of 10 years and divided on a pro rata basis relative to the underlying cost of each program. If a new farm bill does not happen this year but happens next year instead, and if sequestration is allowed to trigger, then the new farm bill will start some $16 billion in the hole before even its first word is written.
FY 2013 Annual Appropriations
Meanwhile, House leaders are seriously considering moving forward with a six-month extension of FY 2012 federal funding levels — known as a continuing resolution — before the fiscal year ends on September 30.
The Senate Appropriations Committee passed its FY 2013 agriculture appropriations bill on April 26, while the House Committee passed its bill on June 19; however, neither chamber has brought its bill to the floor.
The House has thus far passed six of the 12 spending bills this year, while the Senate has passed none. A six-month extension would allow Congress to avoid a spending and/or government shut down show down during the lame duck session. Other options potentially on the table include a longer full year extension and a shorter three-month extension (which would necessitate further action in the lame duck).
Under each scenario, the top line discretionary spending cap is likely to be $1.047 trillion over ten years, which is the level agreed to by Democrats and Republicans in the Budget Control Act (BCA) of 2011. A revision made to the FY 2013 House Budget Resolution in May allows the House to appropriate to the BCA level, despite having first voted to cap spending at $1.028 trillion.
Following the expiration of any short-term continuing resolution, both chambers will resume consideration of their FY 2013 agriculture appropriations bills. At that point, Congress could pass the bills individually or wrap them into a larger package with other appropriations bills. If there is a six month CR, then the actual appropriations bill next March would be for only half a fiscal year as the first half of the fiscal year would already be over.
We will continue to monitor and report on the highly dysfunctional situation as the continuing resolution and various sequestration scenarios takes shape.