Congressional Budget Packages Take Shape -- California Capitol Hill Bulletin -- Volume 10, Bulletin 6 -- March 13, 2003

On March 12 and 13, the House and Senate Budget Committees worked to develop $2.2 trillion spending blueprints for Congress for the 2004 fiscal year. By a 24-19 vote in the early morning hours of March 13, the House committee approved its resolution, which seeks to enact the President's $726 billion economic plan for tax reduction. As presently defined, the plan anticipates a 1% cut in spending below FY 2003 levels to come from all authorizing committees except Armed Services and Intelligence, thereby paying for roughly two-thirds ($470 billion over 10 years) of the total required for the tax plan, with the goal of reaching balance by the end of that period. At least one-third of the $470 billion in cuts would be slated for achievement in FY 2004. Committee documents indicated that the 1% reduction was to come from reductions in waste, fraud and abuse.

The House Budget Committee sought more than $200 billion over 10 years in Medicare savings to help offset the costs of expanding Medicare to provide prescription drug benefits. The 10-year net total for a prescription drug expansion is estimated at $139 billion, with $400 billion in Medicare budget set-asides contrasted with $262 billion in spending reductions. Proponents also touted a proposed increase from $73 billion to $75 billion in FY 2004 spending on education, as well as maintenance of a $10 billion baseline increase in defense spending. The House budget anticipates total FY 2004 discretionary funding of $775.4 billion (with defense spending of $400 billion and non-defense spending of $375 billion), and $1.44 trillion in mandatory expenditures.

On the Senate side, the Budget Committee was moving somewhat more slowly, and Chairman Don Nickles (OK) has indicated that the House plan may be too ambitious to pass in his chamber as currently drafted. The Senate Committee continued markup on March 13, with the Senate Chairman's Mark also providing $698 billion for tax reductions and $27.5 billion in outlay increases. In addition, it proposes $400 billion for Medicare changes and prescription drug benefits over 10 years.

The Senate bill matches the House's $400 billion spending level in FY 2004 for defense programs, rising to $516 billion by 2013. It anticipates a 1.6% increase in overall defense spending, but a 1.9% increase to $136.2 billion for procurement accounts as well as research, development, testing, and evaluation (RDT&E). It proposes a $1.1 billion (6.9%) boost in defense activities at the Department of Energy, a $796 million (10%) increase in funding for the National Nuclear Security Administration, and a $185 million (2.5%) boost in DOE environmental and other defense activities.

For NASA, the Senate bill anticipates the President's budget request level of $14.5 billion, and matches the budget's $5.4 billion total (a 3.2% increase) for the National Science Foundation. The DOE Office of Science is recommended for $100 million more than the President's Budget, or a total of $3.4 billion in 2004 (a 4.6% increase from 2003).

The Senate plan proposes $12.684 billion for Title 1 Grants to Local Education Agencies (a $1 billion or 8.6 percent increase from FY 2003 levels). It would also proposes $10.077 billion for Special Education Grants to States (a $1.2 billion or 13.6% increase), and it anticipates an additional $1 billion increase for IDEA in 2005. Impact aid is recommended for level-funding (not a reduction as proposed by the Administration).

For Pell Grants, the initial bill assumed a $1.3 billion increase to $12.7 billion, supporting a $4,050 maximum award and continuation of movement toward eliminating the Pell Grant shortfall. Head Start would be funded at $6.8 billion, and the bill states that the program should stay at the Department of Health and Human Services rather than move to the Department of Education. Funding for the new Department of Homeland Security would grow to $27.1 billion in 2004.

The Senate budget anticipates an obligation limitation of $32.1 billion for the Federal-Aid to Highways Program -- a 10% increase above the FY03 level of $29.3. The Senate Chairman's Mark assumed the Administration's request to redirect all revenue from ethanol/gasohol taxes from the General Fund to the Highway Trust Fund, thereby increasing trust fund receipts by over $700 million per year. (Currently 2.5 cents per gallon of the tax goes to the General Fund.) For transit, the Senate anticipates a 1% increase to $8.6 billion.

The Senate draft states that it "assumes, but does not reconcile, the permanent extension of the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) which are currently scheduled to expire after 2010." By 2013, the Senate drafters state that the budget would return to balance after the national debt rises from $3.5 trillion in 2003 to $5.3 trillion in 2013.

In addition to core budget questions, other policy issues may have a significant impact on the ongoing budget process, including a provision to permit oil exploration in the Arctic National Wildlife Preserve in both the House and Senate resolutions, and a Senate provision to lower farm subsidy limits.

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