June 2, 2010

Capitol Hill Budget Process on Slow Track; Congress Prepares Tax Bill

Congress is moving slowly—actually not moving very much at all—on developing a budget and drafting the appropriations bills to fund the government for the 2011 fiscal year come October 1. While President Obama was on time this year in submitting his proposed budget to Congress on February 1, the House and Senate have not kept up to the schedule. Significant in the budget resolution each year are the dollar amounts allocated to the appropriations subcommittees to work with in setting the funding levels for programs in the several appropriations bills.

According to the congressional budget schedule, the House and Senate should have completed action by April 15 with floor votes on a budget resolution for the next fiscal year. So far, only the Senate Budget Committee, chaired by Sen. Kent Conrad (D-ND), has moved forward, approving a budget resolution on April 22 with a $4 billion reduction from the president’s discretionary spending request. The Obama budget would freeze the spending total at the 2010 level.

Instead, the Conrad plan aims to reduce discretionary spending to 3% of the gross domestic product by fiscal 2015, with the goal of achieving some measure of reduction in the federal deficit. The Senate budget outline would call for $4 billion less in discretionary spending than proposed in President Obama’s FY2011 budget, with cuts mostly coming from the State Department and international programs. The Conrad proposal also incorporates the president’s three-year spending freeze on nondefense discretionary spending. Conrad still has not been able to schedule floor time for debate on the budget plan.

In the House, the Budget Committee has not even reached the point of approving a resolution to guide FY2011 funding decisions. House Democratic leaders are stuck trying to negotiate an agreement between their fiscally conservative and progressive party members over how much discretionary spending to provide. As might be expected, members of the House are reluctant to vote on broad funding proposals in a budget resolution that could be used against them in the midterm elections coming in November.

If budget talks bog down, the House and Senate leaders likely will develop some alternative process for guiding the drafting of appropriations. Reports from the Hill rate the chances as very low for a budget agreement in the House.

As for appropriations, the budget process allows appropriators to proceed with drafting their bills even though a budget resolution is incomplete. Still, there is no indication that the House subcommittees will begin drafting their funding measures any time soon after legislators return from the Memorial Day recess the second week in June.

The funding outlook for the National Endowment for the Arts (NEA) remains uncertain, and much depends on the size of the allocation granted to the Interior Appropriations Subcommittee to distribute among the programs in its funding bill. With the president’s budget requesting a cut from current appropriations of $167.5 million to $161 million in the coming year, the process starts at a deficit level. Still, support remains strong in the House under the leadership of the new subcommittee chair Rep. Jim Moran (D-VA). Both Moran and his Republican counterpart, Rep. Mike Simpson (R-ID), expressed support for the arts endowment’s programs and were free with their praise when NEA Chairman Rocco Landesman testified before their panel in April.

Appropriations Committee Chairman Rep. David Obey (D-WI) has suggested that instead of additional funding, interest groups should expect to see cuts in programs even below the funding levels requested by President Obama. At a recent hearing before his subcommittee, which funds the departments of Labor, Health and Human Services, and Education, Obey underscored the unfortunate committee task of having to cut from the budget—not add. He even cited one of the reasons for his decision to retire at the end of this year as being “tired of producing bills that are inadequate to meet the needs of the country.” He added, “We are not going to be a very strong country if we continue to recognize the cost of everything and the value of nothing.”

Congress Prepares Tax Bill

House and Senate leaders from the tax-writing committees have agreed on a package of wide-ranging proposals addressing unemployment insurance and health benefits, small-business loan programs, tax cuts, Medicare payments, disaster relief, and mine safety. The bill, which passed the House on May 28, will be voted on and is expected to be passed by the Senate when it returns to work the week of June 7. The legislation includes provisions to extend through the end of 2010 a number of specific tax incentives for charitable donations, including contributions made by older people from individual retirement accounts. The bill also would ease certain rules governing employer contributions to defined-benefit pension plans, a move that should offer relief to charities whose plans have suffered investment losses during the economic downturn.

The bill would allow people age 70¹/₂ and older to continue giving up to $100,000 per year from their individual retirement accounts to charity without having to pay taxes on the distribution. It also would extend tax provisions to encourage donations of property, food inventory, books to public schools, and computer equipment for educational purposes.