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The Budget Agreement and Some Thoughts About Next Steps

House Budget Committee Chairman Paul Ryan (R-WI) and Senate Budget Committee Chairman Patty Murray (D-WA) announced a two-year budget agreement that, in their words, “reduces the deficit—without raising taxes…it cuts spending in a smarter way…prevent(s) another government shutdown and roll(s) back sequestration’s cuts to defense and domestic investments in a balanced way.”

While this budget agreement is not the grand bargain that many will continue to insist is needed, it does provide some increased measure of certainty for the weeks ahead.  In its Statement of Administration Policy, the Office of Management and Budget said “ The Administration urges the Congress to pass this bipartisan agreement and looks forward to working with the Congress to enact clean, full-year FY 2014 appropriations bills based on this agreement in order to continue growing the Nation’s economy and creating jobs.”  The House is expected to vote on the “Bipartisan Budget Act of 2013” by week’s end, and the Senate next week.

The agreement sets discretionary spending for the current fiscal year at $1.012 trillion—about halfway between the Senate budget level of $1.058 trillion and the House budget level of $967 billion. It provides $63 billion in sequester relief over two years, split evenly between defense and non-defense programs. Over the ten year life of this budget agreement, there will be mandatory savings and non-tax revenue totaling approximately $85 billion, and deficit reduction of between $20 and $23 billion. In fiscal year 2014, defense discretionary spending would be set at $520.5 billion, and non-defense discretionary spending would be set at $491.8 billion.  There is a two year extension of sequestration for mandatory programs, by requiring the President to sequester the same percentage of mandatory budgetary resources in 2022 and 2023 as will be sequestered in 2021 under current law.

This agreement does not explicitly call for any further modifications in farm programs.  In fact, there are only two specific references to USDA programs.  According to the section by section analysis, Section 602 would eliminate the current requirement that the Maritime Administration (MARAD) reimburse USDA and USAID for shipping expenses for food aid that exceed 20 percent of total program cost (the value of commodities plus shipping expenses) in a given fiscal year, by the dollar amount above 20 percent reimbursements.  MARAD reimbursed $10 million in FY 2012, according to USDA budget documents.  Section 705(a) would authorize the Natural Resource Conservation Service (NRCS) to prescribe and collect fees of up to $150 per conservation plan to cover some of the costs of providing technical assistance for completing a conservation plan for a producer or landowner.  These payments would be deposited in a new Conservation Technical Assistance Fund, and would be available only pursuant to future appropriations.  The Secretary of Agriculture would have the authority to waive fees for assistance provided to members of historically underserved groups, such as beginning farmers or ranchers, limited resource farmers or ranchers, and socially disadvantaged farmers or ranchers. Fees also could be waived by the Secretary for assistance provided to USDA program participants seeking to maintain payment eligibility under Section 1212 of the Food Security Act of 1985, or to comply with local, state, or Federal regulatory requirements.

So what is next?

For funding the federal government for the balance of FY 2014, it is now expected that the House and Senate Appropriations Committees will be given revised budget allocations by the end of next week.  That will allow those Committees to move forward with their plans to develop an omnibus appropriations bill for House and Senate consideration prior to the January 15th expiration of the current Continuing Resolution.  Whether this is done with one single bill or with a series of bills remains to be seen.  But it had always been expected that final appropriations action would provide spending levels somewhere between those included in the FY 2014 bills approved by the Committees earlier this year.  The Senate Agriculture/FDA Subcommittee received a discretionary spending allocation of $20.93 billion, compared with $19.45 billion in the House.  The Senate Interior Subcommittee, which funds the Forest Service, received a discretionary spending allocation of $30.10 billion, compared with $24.28 billion in the House.    How the reductions are allocated within these bills is left to the subcommittees.  They could find individual program reductions based on changing needs, do across-the-board reductions, or a combination of both.  Programs like food safety and WIC will be expected to continue to receive the strongest support from a variety of committee members, but it is not assured that they may be exempt from any reductions.  The agreement creates a reserve fund for payments to rural schools. Unfortunately, the conferees did not advance a solution to wildfire suppression funding, meaning the appropriators will have to work out an approach on their own and within the constraints of the bill.

The agreement also sets spending limits for FY 2015 in the event a FY 2015 budget resolution is not adopted by April 15, 2014.  For FY 2015, defense discretionary spending would be $521,272,000,000, while non-defense discretionary spending would be $492,356,000,000.  This would free the House and Senate Appropriations Committees to begin consideration of individual bills as had been done in the past so that action could be completed prior to the start of FY 2015 on October 1, 2014.

For the Farm Bill, the agreement also clears the way for final action on the conference report.  Even though Speaker Boehner has said that savings from the Farm Bill would not be used as part of this budget agreement, we had always expected that the Farm Bill conferees would have to be given some indications as to what their spending limits might be.  Remember that in response to the requirements of the Super Committee established by the Budget Control Act of 2011, the House and Senate Agriculture Committee leadership had come up with an agreement to reduce farm spending by $23 billion over ten years.  This reduction continued to be the basis for the Farm Bill this year.

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