1. The Budget Control Act of 2011: Knowns and Unknowns NASBO Annual Meeting St. George, UT August 9, 2011 Federal Funds Information for States

2. Overview: BCA of 2011 Three components with potential to affect future funding for state grant programs: Discretionary spending caps w/adjustments Joint Select Committee on Deficit Reduction Sequestration process Other components of interest: Debt limit, program integrity, higher education programs, balanced budget amendment.

3. Discretionary Spending Caps

4. Joint Select Committee on Deficit Reduction 12 members: 3 from each chamber, party Identify 10-year deficit reduction of at least $1.2 trillion through any means. November 23, 2011 deadline for recommendations, December 23 for congressional vote. Approval would permit dollar-for-dollar increase in debt limit, up to $1.5 trillion.

5. Sequestration Automatic ATB cuts if joint committee process fails to produce at least $1.2 trillion in deficit reduction. Split evenly between defense, nondefense. Includes mandatory spending with several exceptions. Effective in January 2013 for FY 2013 and beyond. Medicare cuts capped at 2%. Different application of ATB cuts in FY 2013 versus future years.

6. Increases in the Federal Debt Limit President can request $900 billion now, of which $400 billion is immediately available and remainder becomes available absent a joint resolution of disapproval. With adoption of $1.5 trillion in deficit reduction or a balanced budget amendment, president can request an additional $1.5 trillion. Absent those benchmarks, president can request $1.2 trillion, also subject to disapproval.

7. Program Integrity Spending for program integrity efforts in Social Security, health care are outside discretionary caps. Goal is to reduce net federal spending by targeting overpayments for benefits. Applies to SSA for SSI, DI and to HCFRA for Medicare, Medicaid, CHIP.

8. Changes to Education Program Increases funding for Pell Grants. Eliminates subsidized loan program for graduate students. Eliminates loan repayment incentives.

9. Balanced Budget Amendment After September 30, 2011, and before December 31, 2011, House and Senate required to vote on joint resolution proposing a balanced budget amendment. Adoption would allow increase in debt limit to $1.5 trillion.

10. Impact on States FY 2012 looks relatively benign from a technical/budget perspective, but politics can be tricky. FY 2013+ hinges on joint committee – If it succeeds, what will it recommend? – If it fails, how will ATB cuts be applied to individual programs?

11. The End Questions? Check for updates at www.ffis.orgwww.ffis.org Almost all states subscribe to FFIS, please contact us for your password and to be added to the distribution list: mhoward@ffis.org, 202-624-5848mhoward@ffis.org