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Weekly UpdatesThe president delivered his $3.1 trillion budget proposal to Congress in early February. The budget calls for an increase of less than 1 percent over fiscal year 2008 for domestic, non-security discretionary spending, resulting in significant funding cuts for programs important to states and local governments. Many of these suggested cuts were immediately criticized by members of Congress on both sides of the aisle. As in the past, the budget proposes considerable increases for defense, other security programs, and foreign aid. It also assumes that the 2001 and 2003 tax cuts will be extended beyond 2010, when most are set to expire.
STATE AND LOCAL GOVERNMENT PRIORITY PROGRAM
Criminal justice. The president did not request any funding for two significant law enforcement grant programs, the Edward Byrne Memorial Justice Assistance Grant program and the Community Oriented Policing Services (COPS) program. In fiscal 2008, the Byrne program received $175 million and the COPS program, $251 million.
Instead, the president's budget includes $178 million for a violent-crime-reduction partnership initiative with state and local law enforcement. Senator Barbara Mikulski (D-Maryland), chair of the Senate Appropriations Subcommittee charged with funding for the Department of Justice (DOJ), rebuked the president's budget cuts, saying, "we have an obligation to keep our communities safe from violent crime, and I am committed to giving them the resources they need to do the job" Given the popularity of these law enforcement programs among both democrats and republicans, some funding for them is likely to be included in fiscal 2009 congressional appropriations for DOJ.
Education. Title I education funding, which supports No Child Left Behind, would receive a $406 million increase from fiscal 2008.
Environment. The president's budget once again proposes reductions in loans to states and local governments for sewage and pollution control. In particular, the budget proposes $555 million for the Clean Water State Revolving Fund, which is used to provide low-interest loans to communities for water-treatment facilities. This is a $134 million decrease from fiscal 2008. However, $842 million in funding is proposed for the Drinking Water State Revolving Fund program, a $13 million increase from the previous year.
Health care. This budget proposal once again includes the president's health-care reform initiative, a new health insurance tax deduction of $15,000 for families and $7,500 for individuals who purchase health insurance through their employers or on their own. Individuals would be required to report as income the amount of employer-paid health insurance premiums. A similar proposal offered by the president in past years could not garner sufficient support from democrats to become a viable health-care reform option.
Health and human services. The president's budget proposes reducing Medicare spending by $12.4 billion in fiscal 2009 and by $178.2 billion over five years. These reductions would come largely from slowing the growth of hospital spending by freezing payment rate increases for three years. For Medicaid, the president's plan proposes $1.8 billion in cuts in fiscal 2009 and $17.4 billion over five years. These savings would be achieved by reducing the federal government's payments to the states. Congressional democrats similarly oppose such severe reductions in Medicare and Medicaid funding, and are unlikely to consider these reductions, especially during an election year.
The budget proposal also cuts spending for the Low Income Home Energy Assistance Program, which assists low-income and poor families with their gas and electric bills, to $2 billion. At the same time, the president's budget proposes an expansion of the State Children's Health Insurance Program (SCHIP) by almost $20 billion over five years and caps participation levels at twice the federal poverty level. SCHIP provides health insurance coverage for lower-income children whose families do not qualify for Medicaid. While many democrats welcomed this increase, they also found it ironic, since the president vetoed several congressional initiatives to expand the program just several months prior, during the 2007 legislative session.
Homeland security. The president's budget slashes total grants for states, cities, and local first responders almost in half, to $2.2 billion for fiscal 2009. In particular, the proposal cuts the State Homeland Security Grant Program by 75 percent, to $200 million, and reduces grants for local firefighters by 50 percent, to $300 million. At the same time, the budget proposal increases funding for border security
In response to the president's proposal for homeland security, Rep. Bennie Thompson (D-Mississippi), chair of the House Homeland Security Committee, noted, "The president's budget neglects firefighters, policy officers, and other emergency service providers who respond to our calls for help by slashing their funding."
Sen. Joseph Lieberman (I-Connecticut), chair of the Senate Homeland Security and Government Affairs Committee, offered a slightly more subdued response, expressing his confidence that Congress would restore adequate funding to protect homeland security as it has done over the past several years in response to the president's proposed cuts.
Housing and community development. The president's budget once again seeks to merge the Community Development Block Grant (CDBG) program with other housing programs and reduce its funding by nearly $1 billion, to $2.9 billion. The Bush administration has proposed eliminating the CDBG program for several straight years; however, Congress continues to reject the president's proposal and has consistently provided funding for the program. It is very likely that Congress will once again fund CDBG, particularly as local governments argue that these grants are indispensable for purchasing and rehabilitating housing that has been abandoned due to increased foreclosures in many communities.
The fiscal 2009 budget does call for some funding increases in housing-related initiatives, including: $7 billion for the Section 8 project-based rental assistance program, an increase of $618 million from fiscal 2008; $2 billion for HOME grants, which help states and local governments build, buy, or rehabilitate affordable housing for rent or for sale to low-income individuals, an increase of $263 million from 2008; and $39 million for grants that assist homebuyers who spend a minimum of 100 hours constructing their homes, an increase of $12.5 million from 2008.
Retirement savings. As in the past, the budget seeks to consolidate tax-free savings opportunities. One proposal, in particular, would consolidate individual employer-based savings accounts, including 403(b), 457,401 (k), and thrift plans, into employer retirement savings accounts (ERSAs), which would largely follow the same rules as 401(k) plans. The president's budget also includes a proposal to permit individuals to use up to 4 percent of their Social Security taxable earnings to fund voluntary personal retirement accounts, starting in 2013. This proposal, in particular, remains unpopular among democrats, who maintain that it is a first step toward eliminating the entitlement nature of Social Security
Transportation. The fiscal 2009 budget requests $57.1 billion for federal transportation programs, down from an estimated $63.4 billion for fiscal 2008. The proposed budget would reduce spending for Amtrak, transit, and local airport grants. In years past, Congress has rejected most major cuts in transportation. House and Senate democratic leaders in the area of transportation criticized the president's proposal, suggesting that the country's aging infrastructure could not withstand such cuts.
NEXT STEPS
In the next step, democrats in the House and Senate, who continue to hold a majority in both bodies, will begin moving forward with their own fiscal 2009 budget resolution, which will provide the framework for the upcoming appropriations process. The budget resolution is a non-binding but important guide that members of Congress can use to pass specific tax and spending legislation this summer and fall. The budget resolution is likely to reflect the priorities of congressional democrats, which include a much greater increase in domestic discretionary spending than the president has proposed.
Also, unlike last year, when the democrats were forced to negotiate or, in some cases, concede to the president's budgets proposals to ward off vetoes of important legislation, democratic leaders in Congress have stated that this year they will stand their ground. In fact, some have even suggested delaying movement in enacting the various appropriations measures and, instead, operating the government under a continuing resolution at fiscal 2008 funding levels. This strategy assumes that a democrat will win the White House in November and avert many of the proposed cuts in funding for programs important to democratic members of Congress.
IN OTHER NEWS
The National Surface Transportation and Revenue Study Commission released its report, Transportation for Tomorrow, on January 15, 2008. Congress established the commission as part of the last surface transportation reauthorization legislation, Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users, (SAFETEA-LU, PL 109-59), and charged it with bringing public awareness and debate to the issues related to the future of the country's surface transportation system.
According to the commission's report, at least $225 billion a year must be invested in the country's infrastructure needs over the next 50 years to stay competitive, with funding provided by the federal, state, and local governments. The most significant, yet most controversial, of the report's funding recommendations included increasing gasoline taxes by as much as 40 cents a gallon over five years to help raise some of the revenue necessary to address these transportation and infrastructure problems. Not surprisingly, this recommended "tax increase" was met with considerable disdain by republican members of Congress, and even some democrats. (The report can be found online at http://www.transportationfortomorrow.org.)
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