1. Lame Ducks, Grand Bargains, Punts and Cliffs NASBO Fall Meeting Friday, October 5, 2012 Alexandria, VA Federal Funds Information for States

2. Where we Left Off in August: What’s the Conventional Wisdom? For appropriations, a CR until the election, BUT… For BCA, agreeing to postpone the day of reckoning, BUT… For expiring tax provisions, a bruising fight, possibly informed by the election. For authorizations, probably nothing, BUT...

3. Six-Month Continuing Resolution Through March 27, 2013 FY 2012 + 0.612% for most discretionary programs (not highways) Mandatory programs: current-law level Extends SNAP, TANF, related programs Additional funds for a few programs

4. The BCA and the Sequester Absent a legislated alternative, a sequester will occur on January 2, 2013 Many mandatory and a few discretionary programs are exempt – OMB report sheds light on its interpretations OMB estimates of ATB cuts: 8.2% (nondefense discretionary), 7.6% (nondefense mandatory), 9.4% (defense discretionary) ATB reduction applied to FY 2013 funding in effect on January 2, 2013 (CR level)

5. Lame Duck Possibilities PolicyGrand BargainPuntCliff FY 2013 AppropriationsUnclearLeave for new CongressN/A BCA SequesterReplace/modifyExtend deadlineImplement sequester Expiring tax provisions: 2% payroll taxProbably extendExtendExpires Bush-era ratesMaintain for <$250KExtendExpire AMTPermanent fixExtendExpire at their peril Debt LimitRaiseSmall increaseNo agreement Expiring legislation: Farm bill (nutrition after March)Reauthorize or notExtendNo agreement TANF (after March)Reauthorize or notExtendNo action Medicaid QI, TMAReauthorize or notExtendExpire? UI EUC/EBReauthorize or notExtendExpire

6. CBO Estimates the Fiscal Cliff

7. Sequester Coverage Status of FFIS VIP Series Programs

8. Sequester Coverage Status of FFIS VIP Series Funding

9. Grand Bargain Revenue Options Go after tax expenditures, including: – Itemized deduction for S/L taxes – Make S/L bond interest taxable – Curb or eliminate mortgage deduction – Curb or eliminate tax exclusion for employer-provided health insurance Changes in tax brackets, capital gains, AMT, etc. Create federal sales tax or VAT

10. The “Other” Federal Spending: Tax Expenditures

11. Grand Bargain Spending Options Modify Medicaid’s financing structure; other changes to mandatory programs Statutorily limit health spending growth More block grants (Medicaid and SNAP) Consolidate programs (job-training) Reduce/eliminate funding for select programs (Pell grants, housing, abandoned mine payments) Move all S/L workers into Social Security

12. What’s the Conventional Wisdom? There is none! For more information, visit: www.ffis.org Or contact:Marcia Howard mhoward@ffis.org Trinity Tomsic ttomsic@ffis.org