Fall 2013 NACo LEGISLATIVE UPDATE. Budget and Appropriations Outlook

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1 Fall 2013 NACo LEGISLATIVE UPDATE Budget and Appropriations Outlook DECEMBER 2013

2 About NACo The National Association of Counties (NACo) assists America's counties in pursuing excellence in public service by advancing sound public policies, promoting county solutions and innovations, fostering intergovernmental and public-private collaboration, and providing value-added services to save counties and taxpayers money Founded in 1935, NACo provides the elected and appointed leaders from the nation's 3,069 counties with the knowledge, skills and tools necessary to provide fiscally-responsible, quality-driven, and results-oriented policies and services for healthy, vibrant, safe and resilient counties

3 Why Counties Matter On November 19, NACo held a Capitol Hill briefing on Why Counties Matter and what counties have at stake in the ongoing budget negotiations

4 Federal Policy Agenda Snapshot of Key County Issues White House/OMB and Federal Agency Regulatory Review Affordable Care Act and Impact on Counties FY2014 Federal Appropriations Aid to State & Local Govts. Immigration Reform and County Impact PILT and Secure Rural Schools Funding and Extension Marketplace Fairness Act (Existing Remote/Online Sales Taxes) Multi-Year Farm Bill Reauthorization Workforce Investment Act (WIA) Reauthorization MAP-21 Highway and Transit Reauthorization

5 Federal Policy Agenda Key Issues and Timelines Sequestration in Effect: Across-the-Board Cuts (Began March 1, 2013) Next round scheduled to begin mid-january FY2014 Appropriations Process: Unfinished; Currently Operating Under a Continuing Resolution until January 15 December 13: Deadline for Budget Conference Committee to Reach Agreement Federal Debt Ceiling: Needs to be raised February/March Tax and Entitlement Reform: Congressional Hearings have Started Punt to Next Year

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7 Federal Budget Picture Budget Deficit Has Hit Record Highs in Past Five Years Source: Congressional Budget Office, May 2013

8 Federal Budget Picture Projected U.S. Debt Absent Reforms, U.S. Debt is Set to Skyrocket in the Coming Decades Source: Fix the Debt

9 Federal Budget Picture In the Long Term, CBO Projects Over $25 Trillion in Entitlements Expenditures Source: Congressional Budget Office, 2013

10 Political Context Congressional Approval Hovers Near Three-Decade Low Source: Gallup.com, March 2013

11 Political Context White House Agenda Distracted This Year IRS Issues Benghazi Attack DOJ Secretly Acquiring AP Reporter Phone Records Syria And now ACA enrollment website issues

12 Federal Policy Agenda Triple Threat of Issues Facing Counties Entitlement Reform Medicaid cuts and cost shifts to states and counties Tax Reform Elimination/reforms to tax-exempt municipal bonds Elimination of state and local property, income and sales tax deductions on federal income tax forms Sequestration and Annual Appropriations Federal aid cuts to state and local governments

13 Entitlements Entitlements Are Still on the Menu Health care spending has slowed BUT entitlement spending is still driver of deficit and debt Medicaid Medicare and Social Security are 100% federal Medicaid financing and administration is federal, state and county In 32 states, counties are required to provide health care for low income, uninsured or underinsured residents In 22 states, counties put up part of the non-federal match for Medicaid There are 964 county hospitals and 647 county nursing homes serving Medicaid beneficiaries in communities nationwide House FY2014 budget changes Medicaid to block grant The President s FY2014 budget basically leaves Medicaid alone

14 Municipal Bonds Proposals to Alter the Tax-Exempt Status of Municipal Bonds Continue to Remain a Threat to County Government 2010 Simpson-Bowles: Proposed elimination of all income tax expenditures; interest earned on state and local municipal bonds would be fully taxable for newly-issued tax exempt municipal bonds 2012 March 2013 April 2013 President s FY2013 Budget Proposal: Proposed placing a 28 percent limit on the value of specified deduction or exclusions from AGI and all itemized deductions; the limit would apply on interest earned for new and outstanding state and local tax exempt bonds FY2014 Senate Budget Resolution: Suggested the possibility of a cap being placed on tax expenditures, which could include the exemption for interest earned on state and local municipal bonds President s FY2014 Budget Proposal: Reiterates 28 percent cap on the value of certain tax benefits, including interest earned on new and outstanding state and local tax exempt bonds SEPTEMBER 2013

15 FY14 Appropriations Appropriators moved FY2014 bills, but process stalled Senate Appropriations Progress ($1.059 trillion; repeals sequester) Appropriations Committee approved 11 of 12 bills (Interior-Environment remains) No bills were approved by full Senate House Appropriations Progress ($967 billion; leaves sequester intact) Appropriations Committee approved 10 of 12 bills (Interior-Environment, Labor- HHS-Education remain) 4 bills were approved by the full House: Defense, Military Construction-Veterans Affairs, Homeland Security, and Energy and Water Lack of Agreement = Government Shutdown When House and Senate leaders failed to reach agreement on FY2014 funding before the end of the 2013 fiscal year on September 30, the federal government was shutdown This shutdown lasted for 16 days, before House and Senate leaders agreed on an interim deal (P.L ) to fund the government until January 15, giving negotiators the opportunity to agree on a full FY2014 deal

16 Budget Agreement Negotiators Bridge Gap, Agree on FY2014 and FY2015 Funding Negotiations led by Senate Budget Chair Patty Murray (D-Wash.) and House Budget Chair Paul Ryan (R-Wis.) produced an agreement on December 10 Under this agreement, the Bipartisan Budget Act of 2013, overall discretionary spending is set at $1.012 billion for FY2014 and $1.014 billion for FY2015 The agreement was passed in the House on December 12 in a vote and is expected to be passed by the Senate before the chamber adjourns for the year The deal also provides $63 billion in sequester relief over FY2014 and FY2015, achieved through $85 billion in savings and revenue County priorities were largely unharmed in this agreement By smoothing out an impending dip in federal discretionary spending, the agreement prevents a second round of cuts to county priority programs such as Payment in Lieu of Taxes (PILT) and Community Development Block Grant (CDBG) The agreement does not include cuts to entitlement programs such as Medicaid or the Social Services Block Grant The tax exemption for municipal bond interest and the federal deduction for state and local taxes also remains intact

17 Farm Bill The previous farm bill extension expired on Sept. 30, 2013 The Senate passed a farm bill in June; House passed two measures Continued conflict over changes to the nutrition title of the bill including cuts to SNAP The farm bill is in conference right now and negotiations continue Senate bill is more positive for counties, including higher levels of mandatory funding for programs like the rural microentrepreneur assistance program, the water/wastewater backlog and the value added producer grant program

18 WRDA WRDA is a biannual bill that authorizes water projects of national significance and authorizes U.S. Army Corps projects water resources, environmental, structural, navigational, flood projection WRDA was last enacted in 2007; since then it has been embroiled in controversies due to its use of earmarks to fund projects Senate approved WRDA in May; House approved WRRDA in October Why do counties care about WRDA? Addresses Army Corps of Engineers Vegetation Management policy clarifications Provides language that includes state and local governments in decision-making processes Includes pilot programs that allow local governments the lead role in implementing projects and studies, levee safety and invasive species

19 Immigration Immigration Debate has Stalled SENATE HOUSE PRESIDENT Bi-partisan comprehensive immigration reform legislation (S. 744) passed in June by a vote Efforts to introduce comprehensive legislation appear to have stalled, a series of piecemeal bills have passed through committees of jurisdiction A draft of the President s immigration reform proposal was leaked on February 16, but is unlikely to become a bill unless Congress gridlocks SEPTEMBER 2013

20 Marketplace Fairness MFA would allow states and local governments to collect existing sales tax from Internet retailers with over $1 million in annual out-of-state sales Successful Bipartisan Senate Vote (69 27) Stalled in House Judiciary Committee House Leadership not against moving, but different version than Senate SEPTEMBER 2013

21 Payment in Lieu of Taxes The Emergency Economic Stabilization Act provided 5 years of mandatory funding for PILT (FY2008-FY2012) In 2012, Congress included mandatory funding for PILT in MAP-21 for FY2013 Unless Congress acts, counties will have received their last fully funded PILT disbursement in June of Without additional mandatory funding, PILT will revert to a discretionary program subject to the annual appropriations process There was an attempt to include in the Senate farm bill but it was ruled out of order What s it going to take? Senior leaders looking for right vehicle and right timing

22 Secure Rural Schools Big Win for Counties: SRS Funding Extended In July of 2012, MAP-21 was signed into law and included mandatory funding for SRS in FY2012 Counties were to receive last payment under the SRS program in January 2013 In October, Congress passed the Helium Stewardship Act that included a provision to extend the SRS program for an additional year NACo continuing to work on a long term solution

23 For More Legislative Analysis Visit

24 2014 Major Conferences 2014 Legislative Conference March 1-5, 2014 * Washington, D.C. Help NACo tackle key federal policy issues Network with Administration and Congress officials 2014 NACo Annual Conference July 11-14, 2014 / Orleans Parish, LA Network with your peers and explore ideas Learn about new innovations, trends and emerging practices in county government

25 Questions? Contact Us! For questions or more information, feel free to contact us Matthew Chase, NACo Executive Director Deborah Cox: Legislative Director or Paul Beddoe: Deputy Legislative Director, Health or Michael Belarmino: Finance & Intergovernmental Affairs or Daria Daniel: Community and Economic Development or Bob Fogel: Transportation or Arthur Scott: Agriculture and Rural Affairs or Yejin Jang: Telecommunications and Technology or Marilina Sanz: Human Services and Education or Julie Ufner: Environment, Energy and Land Use or Ryan Yates: Public Lands or Arlandis Rush: Justice and Public Safety or Hadi Sedigh: Legislative Assistant or SEPTEMBER 2013 NACo was named one of nine remarkable associations in the United States after a four-year study conducted by the American Society of Association Executives and The Center for Association Leadership because of its commitment to members and purpose