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Why March 27 Matters for Education and Sequestration Doesn't

Published:  January 31, 2013

Sequestration is going to happen, at least according to prognostications in the news headlines. How should the education policy community make sense of this latest budget development? It is really hard to say, but here are a few key facts and dates to keep in mind. Follow them and you’ll know as much as can be known in this uncertain budgeting world.

Fiscal Year 2013 Funding, the “CR”: Congress provided federal education programs with fiscal year 2013 funding temporarily at the same level as the prior year on what is called a “continuing resolution,” or CR. The CR provides funding from October 1, 2012 (the start of fiscal year 2013) through March 27, 2013. After that date, under current law, there is absolutely no funding for education programs funded through the annual appropriations process – yet. (Most programs except student loans and part of the Pell Grant program fall under the appropriations process.) That means Congress and the president still need to finalize fiscal year 2013 funding for education programs, or extend the CR, for the remaining six months of the fiscal year, by March 27. But they cannot simply extend the CR. Read on.

Budget Control Act of 2011: Way back in the summer of 2011, Congress and the president enacted the Budget Control Act, which set up the Joint Select Committee on Deficit Reduction (aka the supercommittee). The supercommittee was supposed to draft legislation that would cut the budget deficit projected over the next nine years. Knowing that the committee would probably fail in that effort (it did), lawmakers wanted an insurance policy that some sort of deficit reduction would occur anyway, through automatic spending reductions.

That insurance policy is set to occur by two separate mechanisms. One is the much-talked-about sequester (more on that below). The other, lesser-known – but more important – mechanism is the spending caps imposed on annual appropriations funding (federal education programs are largely funded through the annual appropriations process) through fiscal year 2021. For the purposes of this explanation, the two mechanisms are different only in their timing.

The Sequester: The sequester is supposed to reduce spending already provided for fiscal year 2013. Originally the sequester was supposed to kick in on January 2, at which point it would reduce the appropriation for education programs that Congress provided for fiscal year 2013 on October 1, 2012, by 8.2 percent. But Congress and the president postponed that date until March 1, 2013 and reduced the amount of the cut proportionally to 5.1 percent. So Congress funded education programs for fiscal year 2013 under the continuing resolution at fiscal year 2012 levels, and the sequester cuts them to a level 5.1 percent below that on March 1. Simple. Under current law, we can accurately say that if education program X is funded at level Y for fiscal year 2013, then when the sequester hits on March 1, the funding level will be 5.2 percent below Y afterwards.

Education Funding is $0.0 Billion on March 27, Twenty-Seven Days Post Sequester: Using the formula outlined above, we could show you a long list of education programs, their current funding levels, and their post-sequestration levels come March 1, but that would be a waste of time. Funding for all the programs goes to zero on March 27 when fiscal year 2013 funding under the CR expires, until Congress and the president decide specific funding for each program for the remainder of the year.

To recap, the post-sequester level of funding for education programs is 5.1 percent below current funding provided on the CR from March 1 to March 27, and after that the funding level is zero until Congress passes an appropriations bill for the remaining six months of fiscal year 2013 (which, incidentally, is when the bulk of an annual education appropriation is actually spent). Yes, the sequester will cut education programs by 5.1 percent on March 1, but what matters is the funding level Congress and the president set for programs as of March 27.

Watch the Spending Caps: Want to know what funding level Congress and the president will enact for education programs in the second half of fiscal year 2013, after the sequester kicks in and after the fiscal year 2013 CR expires? So do we. Unfortunately, no one knows. We only have clues. First, when the CR expires nearly a month after sequestration is implemented, on March 27, Congress cannot under current law appropriate funding for domestic discretionary programs – including education – above post-sequestration levels. In other words, after the sequester, the appropriations pie is shrunk under that new cap to a level that resembles the year 2008.

But unlike the sequester, the cap doesn’t apply to individual programs; instead, it applies to all of the programs measured in aggregate. Therefore, when Congress and the president are forced to finalize fiscal year 2013 funding after March 27, the aggregate amount of funding cannot exceed the spending cap that matches the post-sequester funding level. Theoretically, in the final fiscal year 2013 funding bill, Congress could increase funding for any and all education programs, but other programs in other agencies would have to sustain a big cut to make everything fit within the cap. It’s a zero-sum game.

In other words, what we know is that Congress and the president have not finalized fiscal year 2013 education funding; that when they do, they’ll be working with an appropriations pie for all domestic discretionary programs that looks similar to 2008 levels of funding in aggregate; and that they could still opt not to cut funding for specific education programs, provided they work within the cap.

Spending Caps in Place Through 2021 and Enforced by More Sequesters: While there is a sequester pending for March 1, note that the spending caps discussed above – which apply for each successive fiscal year through 2021 – are enforced by more sequesters. For example, suppose on March 27, Congress and the president pass a fiscal year 2013 appropriations bill that exceeds the cap in aggregate by $10 billion. In that case, a new sequester would be triggered to reduce appropriations by $10 billion. The sequesters give the caps some real teeth.

Of course, if Congress and the president agree, they could always pass legislation to change the caps, waive the caps, turn off or postpone any, all or some of the sequesters, or some combination. Again, uncertainty abounds.

To wrap up, the pending March 1 sequester is not what education policy stakeholders should be watching. Instead, they should watch for how lawmakers finalize fiscal year 2013 appropriations by March 27, post-sequester. Will they waive the new, lower spending cap? Will they abide by the cap, but spare education programs budget cuts? For now, it’s just a waiting game.

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