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On the night of Tuesday, December 10th, a deal was struck between the House of Representatives and the Senate, with support from the White House, which makes a number of important policy changes that will reduce the deficit, temporarily replace the sequester, and begin the process of funding federal agencies before the January 15th deadline. This memo outlines the purpose and detail of this agreement.

Background

In the middle of October, in the midst of a federal government shutdown and approaching the deadline when the US Treasury would default on certain debts, Congress reached a deal that reopened the government and raised the debt ceiling. Part of that agreement required the House and Senate to establish a conference committee to come to an agreement on their respective annual budget blueprints by December 13th. Though initial reports that this conference could be a venue for a larger “Grand Bargain” or other substantial reforms for long-term deficit reduction, the final agreement is far more modest.

Strategic goals

As time went on and ambitious long-term deficit reduction plans were taken off the table, two major goals of the conference evolved. First, conferees wanted to set in place discretionary federal spending levels which would allow congressional appropriators to start their work, and hopefully avoid another government shutdown. Second was a replacement for automatic, across-the-board cuts from federal agencies, called sequestration.

Top line numbers

The agreement sets into place spending levels for FY 2014 at $1.012 trillion. This number gives the Appropriations Committees the green light to fine tune their spending bills as we approach the January 15th deadline to avoid a government shutdown. The agreement also replaces $63 billion in sequestration over the next two years. In total, the agreement reduces the deficit by $23 billion over the next 10 years. Below is a list of targeted deficit-reduction provisions in the deal:

Health and Human Services Policy:

  • Requires states to implement program to recover overpayment of unemployment benefits
  • Requires “dead beat parents” to pay all for health costs of their children before Medicaid pays, with the exception of life-threatening health issues
  • Increased protection of the Social Security database of deceased beneficiaries, imposes penalties for violations of the database
  • Requires Social Security to identify improper unemployment payments to certain convicts

Energy and Natural Resources Policy:

  • Eliminates federal research funding for deepwater oil and gas extraction
  • Revises mineral leasing law to have states pay a portion of the administrative costs
  • Approves US-Mexico agreement on outer continental shelf oil and gas development
  • Revises how pre-paid oil and gas royalties are repaid to the lessee
  • Requires petroleum companies to pay federal royalties in cash, not oil

Federal Retirement Policy:

  • Increases by 1.3 percent the federal employee contribution to the federal pension system to employees hired in 2014 and after
  • Gradual decrease in cost-of-living adjusted for retired military under 62

Higher Education Policy:

  • Reduces reimbursement to agencies which rehabilitate Federal Family Education Loans
  • Makes uniform the financing of non-profit rehabilitation of Federal Family Education Loans

Transportation Policy:

  • Increases by 60 cents the maximum fee per ticket for aviation security
  • Requires TSA to continue its duties to protect the “exit lanes” at airports
  • Eliminates inter-agency reimbursements for foreign shipments of federal cargo

Miscellaneous Policy:

  • Extends Customs and Border Protection user fees
  • Caps financial compensation of federal contractors to $487,000
  • Increases annual premium from certain companies paying into the Pension Guarantee Benefit Corporation
  • Allows the Natural Resources Conservation Service to impose a fee on professional services it provides to non-federal conservation plans
  • Eliminates certain asset forfeiture funds
  • Requires the federal government to offer federal employees “self plus one” health plans

Force of law

A congressional budget resolution is almost entirely symbolic, does not require the president’s signature, and does not carry the force of law. Therefore, to effectuate the agreement and enact those changes into law, the conference used a different vehicle. Instead of negotiating the congressional budget resolution (no force of law) the agreement will be substituted for a prior joint resolution (carries the force of law). If both chambers approve it and the president signs it, it will become law.

For more information

Please feel to reach out to McDonald Hopkins Government Strategies for more information regarding the budget deal and how it may impact you and what you can do about it.

Steven C. LaTourette, President | 202.559.2600

McDonald Hopkins Government Strategies LLC
101 Constitution Avenue NW, Suite 600 East, Washington, D.C. 20001

www.mcdonaldhopkinsgs.com

IMPORTANT NOTICE:

Although McDonald Hopkins Government Strategies LLC is owned by the law firm McDonald Hopkins LLC, McDonald Hopkins Government Strategies is not a law firm and does not provide legal services. Accordingly, the retention of McDonald Hopkins Government Strategies does not create a client-lawyer relationship and the protections of the client-lawyer relationship, such as attorney-client privilege and the ethics rules pertaining to conduct by lawyers, do not apply.

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