1. Federal Budget Update: FY 2013 Budget and the BCA NCSL Legislative Summit August 6, 2012 Federal Funds Information for States

2. Part 1: Will Congress Enact a FY 2013 Budget?

3. FY 2013 Appropriations: A $19 Billion Difference FY 2013 302(b) Allocations (in billions) FY 2013 Funding Levels Senate v. House Appropriations BillsHouseSenate DollarsPercent Agriculture$19.4$20.8 $1.46.6% Commerce-Justice-Science51.151.9 0.71.4% Defense519.2511.2 -8.1-1.6% Energy-Water Development32.133.4 1.33.8% Financial Services-General Government21.223.0 1.88.0% Homeland Security39.139.5 0.41.0% Interior-Environment28.029.7 1.75.6% Labor-Health and Human Services-Education150.0157.7 7.74.9% Legislative Branch4.34.4 0.13.0% Military Construction-Veterans Affairs71.772.2 0.50.7% State-Foreign Operations40.149.8 9.719.5% Transportation-Housing and Urban Development51.653.4 1.83.4% Total Discretionary Spending$1,027.9$1,047.0 $19.11.8%

4. FY 2013 Appropriations: Status House Senate Appropriations Bills Approved by Committee Passed by Full House Approved by Committee Passed by Full Senate Agriculture6/19/2012 4/26/2012 Commerce-Justice-Science4/26/20125/10/2012 4/19/2012 Defense5/17/20127/19/2012 Energy-Water Development4/25/20126/6/2012 4/26/2012 Financial Services-General Government6/20/2012 6/14/2012 Homeland Security5/16/20126/7/2012 5/22/2012 Interior-Environment6/28/2012 Labor-Health and Human Services-Education 6/14/2012 Legislative Branch5/31/20126/8/2012 Military Construction-Veterans Affairs5/16/20125/31/2012 5/22/2012 State-Foreign Operations5/17/2012 5/24/2012 Transportation-Housing and Urban Development6/19/2012 4/19/2012

5. FY 2013 Appropriations: At What Cost to States? Proposed FY 2013 Funding for Major Discretionary Programs Compared to FY 2012 (See Jim Martin Table for Detail): Federal AgencyPresidentHouseSenate Education1.3%n/a0.5% Health and Human Services-1.9%n/a1.2% Housing and Urban Development 1.7%2.4%5.2% Energy/EPA-11.6%-36.2%n/a Justice-1.5%-6.0%6.9% Homeland Security29.4%27.2%3.5% Labor-2.2%n/a-2.9% Transportation6.8%-0.3%0.3%

6. Will Congress Pass a FY 2013 Budget? Continuing Resolution (CR) likely, but for how long? – House and Senate leaders reached broad agreement on six month CR – Details still need to be resolved – Will it pass both houses in September? – What happens after?

7. Part 2: What if the BCA Sequester is Implemented Next January?

8. Overview: BCA of 2011 Three components with potential to affect future funding for state grant programs: Discretionary spending caps w/adjustments (done) Joint Select Committee on Deficit Reduction (failed) Sequestration process (January 2, 2013)

9. Sequester Process: What We Know $984 billion in cuts required over FYs 2013-2021 Roughly $109 billion per year, half from defense and half from nondefense Many mandatory and a few discretionary programs are exempt ATB cuts in FY 2013, different process for FY 2014+

10. Sequester: What We Don’t Know What is the ATB percentage cut? CBO estimates 7.8% for nondefense discretionary and mandatory, 10% for defense Exact percentage won’t be known until January 2013

11. Sequester: What We Don’t Know How will individual programs be affected? Percentage reduction applied to FY 2013 funding (or CR level) OMB has authority to apply exemptions and special rules Examples (Medicare, UI, health care reform, trust funds)

12. Sequester Coverage Status of FFIS-Tracked Programs

13. Sequester Coverage Status of FFIS-Tracked Funding

14. Program Areas Most Affected Budget Function% of Funding Covered by Sequester Agriculture100% Employment and Training100% Community Development90% General Gov’t85% Energy, Env., Natural Resources78% Justice62% Education54% Income Security and Social Services23% Health4% Transportation4%

15. Sequester: What We Don’t Know How much discretion do agencies have in implementing sequester? Virtually none. Some influence over timing (recent ED guidance) Will Congress and the president modify the BCA? Various proposals, no agreement (explicit legislation required) Congress did approve legislation requiring OMB to provide sequester details

16. What We Can Guess About a Sequester Potential Impact of BCA Sequester (in millions) FY 2010FY 2011FY 2012FY 2013 Nondefense Grants: Covered ProgramsN/A$109,539$106,682$98,815 Dollar Change -2,857-7,867 Percent Change -2.6%-7.4% NIH Funding: TotalN/A23,753N/A21,900 Dollar Change -1,853 Percent Change -7.8% Defense Funding: Total508,490N/A 457,641 Dollar Change -50,849 Percent Change -10.0%

17. Will Sequester Happen? Conventional Wisdom: agreeing to postpone the day of reckoning, BUT… – Many other issues at play – May depend on outcome of election – Waiting too long to act could have a major negative impact on economy How will companies respond to WARN Act and latest guidance?