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December 16, 2013


GENERAL MEMORANDUM 13-111
Bipartisan Budget Agreement Reached; Enactment Likely This Week
Senate and House Budget Committee Chairs, Senator Murray (D-WA) and
Representative Ryan (R-WI), announced last week that the committee charged with
making recommendations on topline discretionary spending levels for fiscal years (FYs)
2014 and 2015 had reached such an agreement.1 This agreement would slightly raise the
FYs 2014 and 2015 spending caps set in the Budget Control Act of 2011 (PL 112-25,
"BCA"). If this agreement is enacted, there would not be an across-the-board reduction
in discretionary spending "sequestration" in FYs 2014 and 2015, provided that the
appropriations committees enact bills which do not exceed these new caps. This
agreement does not however, include a change to the formula for automatic cuts to
mandatory spending that the BCA provides, therefore the sequestration of mandatory
spending will continue. The budget agreement was put into legislative language as a
substitute amendment to H. J. Res. 59 and was approved by the House on December 12,
2013, by a vote of 332-94. The Senate is expected to begin consideration of the bill on
December 17 and the President has stated that he will sign it.
How the BCA Works. The BCA works by setting overall spending caps for each
FY from FY 2013-FY 2021 and then imposing additional cuts or "sequestration" to
further lower these caps if Congress does not craft a package of spending reductions and
revenue increases. Hence, each FY has a spending cap and then an even lower cap which
would be the result of sequestration if Congress does not act. For example, Congress
failed to craft a package of spending reductions and revenue increases so there was a
partial sequestration in FY 2013.
What the Budget Deal Would Provide. For FY 2014, Senate Democrats had
proposed keeping the BCA's FY 2014 spending cap but not including the additional
spending cuts from sequestration. This spending cap would have been $1.058 trillion.
The House Republicans, however, had proposed keeping the BCA's FY 2014 spending
cap AND including the additional cuts from sequestration. This spending cap would
have been $967 billion. The budget agreement being considered by Congress essentially
splits the difference between the House and Senate numbers and provides a $1.012
trillion cap for FY 2014 discretionary spending and a $1.014 trillion cap for FY 2015
discretionary spending while making some targeted spending cuts and increasing certain
fees. We note that while both of these caps are higher than the FY 2013 cap they are still
more than $31 billion lower than the total spending level for FY 2012 ($1.043 trillion).
1

See our General Memorandum 13-093 (October 18, 2013).

HOBBS STRAUS DEAN & WALKER, LLP

WASHINGTON, DC | PORTLAND, OR | OKLAHOMA CITY, OK | SACRAMENTO, CA

General Memorandum 13-111


December 16, 2013
Page 2

Outlook for Appropriations. All attention now is on the appropriations


committees which, having agreement between the House and Senate on a topline
spending cap, can complete work on FY 2014 appropriations bills. Before that work
begins, the appropriations chairs must allocate the funding among the subcommittees,
which is expected to be done within a few days. It has been reported that the
subcommittee allocation amounts will not be made public. Committee members and staff
will work over the holidays to complete their bills, most of which will be combined into
an omnibus appropriations bill to be introduced in early January in hopes of enactment
prior to January 15, 2014, the day the Continuing Resolution which is funding federal
agencies, expires.
Two bills often mentioned as unlikely to be in the omnibus bill due to the vast
differences between the House and Senate are the Interior, Environment, and Related
Agencies and the Labor-HHS-Education and Related Agencies bills. The alternative is
for Interior and Labor-HHS Education to receive funding under a Continuing Resolution,
thus making it very difficult to get any increases.
Sequestration of Mandatory Programs; SDPI. Funding for the Special Diabetes
Program for Indians (SDPI) is considered "mandatory" funding and is still subject to
sequestration under a different section of the BCA which includes a complicated formula
for calculating the amount of sequestration for these "mandatory" programs. In FY 2013,
SDPI received a 2 percent cut as did other mandatory programs. The House and Senate
agreement would not change the formula in the BCA but the numbers going into the
formula may differ between FY 2013 and FY 2014. We have inquired with IHS as to
whether they believe there will be sequestration of SDPI funds under the budget
agreement but they are still reviewing the matter.
Other Provisions. The bill also contains a Medicare "doc fix" which blocks the
23.7 percent reduction in Medicare physician services which was scheduled to take effect
January 1. There are many other provisions in HJ Res 59, and a summary and section by
section analysis may be found here:
http://www.budget.senate.gov/democratic/index.cfm/files/serve?File_id=0129b68
8-500e-4c81-a37d-d3643e0709c7
http://www.budget.senate.gov/democratic/index.cfm/files/serve?File_id=9d3728a
a-cf0a-4ddf-bfd4-d02ed4de570f
Please let us know if we may provide additional information regarding the budget
agreement.
###
Inquiries may be directed to:
Karen Funk (kfunk@hobbsstraus.com)
Marie Osceola-Branch (mosceola-branch@hobbsstraus.com)
Moriah O'Brien (mobrien@hobbsstraus.com)

HOBBS STRAUS DEAN & WALKER, LLP

WASHINGTON, DC | PORTLAND, OR | OKLAHOMA CITY, OK | SACRAMENTO, CA