Sequestration: Where Do We Stand?

Late on January 1, Congress enacted a bipartisan measure, The American Taxpayer Relief Act (H.R. 8), to avoid the fiscal cliff. The deal, which was agreed to by the White House and Sen. Mitch McConnell (R-KY), the Senate Minority Leader, primarily tackles tax measures. Deliberate action on spending reduction! s, inclu ding sequestration and Fiscal Year 2013 appropriations levels is expected in March. According to initial analysis, the enacted deal affects PTA priorities in the following ways:

Sequestration Postponed Until March 1

The 8.2 percent across-the-board spending cuts known as sequestration has been delayed for two months. Thus, the threat of deep cuts to nondefense discretionary spending, including public education, is still present and very real.
Legislation enacted on January 2 averted the so-called fiscal cliff by delaying until March 1 the across-the-board budget cuts required under sequestration and extending current tax rates for all but high-income households. The American Taxpayer Relief Act of 2012 (H.R. 8) replaces the $24 billion in savings lost from postponing the sequester by trimming $12 billion from discretionary spending—split between security and nonsecurity programs—and raising $12 billion in revenue through tax policy changes related to individual retirement accounts.

Congress must find $4 billion in targeted discretionary reductions for the current fiscal year (FY) and another $8 billion in FY2014. House and Senate lawmakers will determine the specific cuts when they draft legislation funding the government for the remaining six months of FY2013 and for FY2014, so it is not yet known which programs will be affected.

Despite a mandated $2 billion cut this year, total nonsecurity spending still would be higher—on an annualized basis—than the level of funding under the continuing resolution that expires March 27, according to the Congressional Budget Office (CBO). “[T]herefore, reducing the nonsecurity cap . . . would not have any impact on the budget relative to that current level of funding,” CBO found. Congress will have to revisit the sequestration issue at the same time the debt ceiling must be addressed, and a few weeks before the continuing resolution expires.
In related news, officials at the Department of Defense (DoD) are considering postponing the submission of the department’s FY2014 budget until after the customary February deadline due to the sequester delay, though a DoD spokesman indicated the department still could have its budget finalized by February. Stay tuned.