McDonald Hopkins Government Strategies Advisory: House and Senate Release FY2016 Budgets -- March 19, 2015
This week, the House and Senate unveiled their FY2016 budgets. Below is a breakdown of those budgets by sectors of interest. Where possible, we have provided information on what the administration’s budget numbers were in these sectors. Note that the information isn’t always apples to apples – for the budget formats used are not consistent among the administration, the House, and the Senate.
In addition to the topline numbers, we have provided a great deal of information on the details of the proposals.
We hope that you find this information helpful.
Topline Budget Numbers
President Obama’s Proposed Budget
$3.999 trillion in spending outlays
$3.525 trillion in revenue
$474 billion deficit
$1.087 trillion in discretionary spending
$58 billion in Overeas Contingent Operations (OCO)
$3.789 trillion in spending outlays
$3.460 trillion in revenue
$346 billion deficit
$1.017 trillion in discretionary spending
$94 billion in OCO
$3.808 trillion in spending outlays
$3.460 trillion in revenue
$343 trillion deficit
$1.017 trillion in discretionary spending
$58 billion in OCO.
President Obama’s Proposed Budget
Administration Base Defense: $561 billion
Administration OCO (war): $51 billion
Administration Total Defense: $612 billion
House Base Defense: $523 billion
House OCO (war): $90 billion
House Total Defense: $613 billion
*NOTE: Figures may change – House might consider amendments on this topic at mark up.
The FY16 House budget spends $613 billion for defense (base funding plus Overseas Contingency Operations). The Budget Control Act limits base defense spending to $523 billion, but the law doesn’t cap war spending, which is funded at $90 billion by the House. (Note: The OCO account is funded at $94 billion, but some of that is spent on non-military activities conducted by the State Department).
The House budget resolution maintains the statutory spending caps on discretionary spending, but it provides an extra $39 billion for war spending compared to the administration’s budget request.
The rationale for the House adding $39 billion to the OCO account in the FY16 budget resolution is to boost defense outlays for FY16 above what the president is proposing. This number allows House Republicans to propose spending $1 billion more than the president on national defense. The President’s FY16 total for defense is $612 billion.
However, some House Republicans opposed the House budget resolution (as drafted by the chairman). Republican House Armed Services Committee (HASC) members argued that not enough funding is provided for defense. Of the $39 billion added to the OCO account, $20 billion would be available only if savings were found elsewhere in the budget. This $20 billion is provided in an account called the “Defense Readiness and Modernization Fund.” With the possibility of savings not being found, which would result in the House budget spending less on defense than the Administration’s budget, some argue that the budget is not strong enough on defense.
Facing the threat of Republican House Armed Services Committee Members voting against the budget, an amendment was drafted in advance of the mark up to increase OCO funding for defense. While Budget Committee Chairman Tom Price was not particularly concerned about the revolt among HASC members and even raised concerns about losing support among his committee members if more spending (defense or otherwise) is added, leadership intervened on behalf of the HASC members. It is yet to be determined whether or not fiscal hawks will revolt at the concept of adding more funding for defense spending.
Senate Base Defense: $523 billion
Senate OCO (war): $58 billion
Senate Total Defense: $581 billion
The Senate FY16 budget proposes to spend $581 billion on defense. $58 billion would be provided in the OCO account and $523 billion (in line with the Budget Control Act’s (BCA) statutory spending caps) would be provided in base defense funding.
Instead of increasing defense numbers, the Senate includes a deficit-neutral reserve fund that could be used to increase discretionary spending (defense and/or non-defense) next year if legislation is enacted to raise the post-sequester caps and offset any increased spending.
Some Republicans (Senator Graham) stated that they would not support a budget that proposes less for defense than the administration’s budget proposal. Others (Senator McCain) have indicated that the idea of boosting war funds artificially for purposes of lifting the total defense budget is a gimmick.
The Senate Budget Committee is expected to mark up their resolution on Thursday.
Administration Transportation Budget: $77.158 billion.
House Budget Outlays for Transportation: Exact numbers still to be announced.
The Republican House budget urges "reforms to ensure the solvency of the Highway Trust Fund while at the same time providing flexibility for a surface-transportation reauthorization that does not increase the deficit." The budget includes creation of a reserve fund to provide for innovative thinking to bring a new surface-transportation bill to passage, as long as that legislation is deficit neutral.
The House GOP budget emphasizes what it describes as "innovative financing mechanisms" to support surface-transportation infrastructure and safety programs – for example, with further public-private sector partnerships demonstrated in the Transportation Infrastructure Finance and Innovation Act program. The budget also recommends giving states more flexibility to fund the highway projects they feel are most critical.
Beyond the Highway Trust Fund, the House GOP budget sets out to target inefficiencies and duplication in a wide range of federal transportation programs to increase effectiveness for travelers and save taxpayer dollars.
As to the Transportation Security Administration (TSA), the House budget seeks to enhance operational efficiencies "without compromising security priorities." The budget encourages TSA to continue to look for new approaches to airport security. The budget also offers continued support for the Screening Partnership Program, TSA’s privatized screening program.
Senate Transportation Budget Authority: $71.528 billion.
The Senate transportation budget establishes two deficit-neutral trust funds for infrastructure and air transportation.
Administration Base Discretionary Funding for Health and Human Services: $79.9 billion
Administration Outlays Medicare: $583 billion
Administration Outlays Medicaid: $351 billion
House Budget Outlays Medicare: $571 billion
House Budget Outlays Medicaid and other Health: $368 billion
The House GOP budget relies heavily on policies included in previous House budget proposals to achieve healthcare savings in their plan. The House budget emphasizes what they say is greater choice and flexibility for individuals, families, businesses, and states while spurring innovation and responsiveness.
To be expected, the House budget repeals the 2010 healthcare law in its entirety, including all of the tax increases, regulations, subsidies, and mandates. Repealing the president’s signature healthcare law is estimated to save $2 trillion. The House budget also proposes to transition Medicare to a premium support model, a voucher-like program for seniors enrolling in or after 2024. Seniors would receive a subsidy to purchase coverage, and the House budget proposes to establish a Medicare exchange for seniors to shop for health plans. To further address the Medicare Trust Fund’s insolvency, the House plan would combine Medicare Parts A and B and include medical liability reform. Unlike the president’s budget, the House budget does take into account the costs associated with repealing and reforming Medicare’s SGR formula. The House budget repeals Medicaid expansion and transforms the Medicaid program into a state-run program. States would have greater flexibility under the House Republican’s proposed Medicaid reform. Each state would receive funds known as State Flexibility Funds to tailor its Medicaid program to meet the population’s unique needs. The Price budget would also combine Medicaid and the State Children’s Health Insurance Program (SCHIP) into one program. In addition, the House proposal establishes a reserve fund to continue funding for SCHIP, which is set to expire in September.
Senate Budget Authority Health: $414.3 billion
Senate Budget Authority Medicare: $567.2 billion
The Senate budget would repeal the Affordable Care Act, shift responsibility to the states for the Medicaid program, and reduce Medicare spending to achieve the majority of the budget's total of $5.1 trillion in spending cuts. However, Senate Budget Chairman Mike Enzi did not include former House Budget Chairman Paul Ryan's proposal to allow seniors beginning in 2024 to choose between private insurance and traditional Medicare benefits. Chairman Enzi does propose to convert the Medicaid program into a model that resembles Children's Health Insurance Program (CHIP), which is based largely on block-grants to states.
Similar to the House plan, the Senate supports the repeal of Medicare's Independent Payment Advisory Board (IPAB) and makes changes to the healthcare law to ensure that Medicare savings are directed to the Medicare program, instead of spending. The Senate budget supports the administration's goal of cutting Medicare spending by $430 billion over 10 years, and the Senate plan aims to extend the Medicare Trust Fund's solvency by five years. However, the Senate proposal is less specific than the House about how it would do so.
The Senate budget also extends CHIP and establishes a new program to serve low-income, able-bodied adults and children who are eligible for Medicaid. Unlike the House proposal, which included reconciliation instructions for 13 committees, the Senate budget only includes reconciliation instructions for two committees: the Senate Committee on Finance and the Senate Committee on Health, Education, Labor and Pensions. These instructions are intended to give the committees the ability to respond to the Supreme Court's decision on federal subsidies for the Affordable Care Act.
The House Republican budget resolution lays the foundation for future changes to tax policy. The House Republicans reduce revenue compared to the President’s Budget by roughly $3 trillion over 10 years. Foremost on their agenda is comprehensive tax reform which would close tax loopholes and reduce marginal rates for individuals and corporations. It hopes to also reduce the number of tax brackets. Further, it eliminates the troublesome Alternative Minimum Tax. The budget does not identify the specific provisions of the tax code it intends to close, or whether the net result of tax reform should be budget neutral.
The Senate Republican budget reflects very similar priorities for the year. The two chambers use the same revenue baseline, and both declare that they will not raise taxes. Just as the House, the Senate Budget identifies comprehensive tax reform as a goal, but the Senate does not provide the same detailed goals as its House counterpart. However, the Senate identifies the well-liked business tax credits for research and innovation as a provision it will extend. It also alerts Congress to its intent to repeal the 2.3 percent medical device tax.
FOR MORE INFORMATION:
Please feel free to reach out to McDonald Hopkins Government Strategies for more information regarding the FY 2016 budgets, how they may impact you, and what you can do about it.
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