The opening work period of the second session of the 112th Congress concluded last Friday, finishing one of the busier weeks in recent memory. Among other activities engaged since convening in January, Congress received and began considering President Obama’s FY 2013 budget, reached an agreement on legislation extending the payroll tax cut for the remainder of the year, considered significant transportation legislation, and saw the introduction of a bipartisan bill to reform the way our nation monitors and protects against a cyber attack.
Congress will be in recess this week. Below is a summary of the significant work undertaken in recent weeks.
Agreement Reached on Payroll Tax
Last Thursday morning, House Republican and Democratic leaders announced that a deal had been reached on a package of proposals that would extend the payroll tax holiday, unemployment benefits, and several Medicare provisions, including reimbursement rates for physicians.
The bill extends the 2-percentage-point reduction in the 6.2 percent Social Security payroll tax through 2012 for about 160 million workers, saving the average family about $1,000 this year. It also extends unemployment benefits through the end of 2012, but reduced unemployment coverage by the end of the year from the current maximum of 99 weeks to 63 weeks in states moderately impacted by the recession and 73 weeks in states with the highest jobless rates.
Negotiations on these extensions had been hung up in recent weeks in an attempt to find about $50 billion in spending cuts and new revenue to offset the $50 billion cost of the unemployment extension and the Medicare change. The offsets were ultimately found by increasing the amount new federal employees will have to pay into their pension funds, as well as a reduction of nearly $5 billion from a fund created under the 2010 health-care law to help primary-care physicians prevent illness. The bill also cuts Medicare funding for hospitals and raises $15 billion in revenue by selling off public spectrum to telecommunications companies (see below).
Incentive Spectrum Auctions Included in Payroll Tax Extension Legislation
As noted above, the payroll tax extension compromise includes a provision authorizing “incentive auctions” of spectrum currently licensed to broadcast television stations. These auctions are expected not only to raise revenues to offset a portion of the payroll tax cut extension, but also to accelerate the build out of advanced wireless networks and the creation of an emergency broadband communications network. The legislation provides up to $1.75 billion to compensate broadcasters who elect voluntarily to give up their existing spectrum; the FCC would then seek to auction the spectrum at higher prices to wireless companies. The total revenue from these auctions is projected to be around $25 billion. A portion of the auction proceeds and spectrum are designated for use by a “First Responder Network Authority” (“FirstNet”) that will construct a national, interoperable network for police, firefighters and other public safety uses. The legislation also allows the FCC to create bands of unlicensed airwaves (“white spaces”) that could be used for Wi-Fi applications. The FCC is expected to begin the process of coming up with auction rules fairly quickly; however, the legislation establishes a ten-year deadline for completion of the auctions and it probably will be several years before any spectrum is reclaimed and auctioned.
President Obama Submits FY 2013 Budget
On February 13, President Obama formally submitted his budget request to Congress for FY 2013. In doing so, the Obama Administration claimed that the document was a blueprint for providing a short-term stimulus for job creation (including increased spending in the areas of transportation and infrastructure projects, education, civilian research, and green energy), while also including provisions geared toward achieving long-term deficit reduction. The request also called for an increase in taxes, by allowing upper tax bracket rate cuts (originally granted during the Bush Administration) to expire.
Under the President’s FY 2013 request, the government would spend $3.80 trillion in fiscal 2013, offset by only $2.9 trillion in revenues (a deficit of $901 billion). Proposed spending would be up from $3.79 trillion in fiscal 2012. Despite the foregoing, Administration officials said the budget would reduce accumulated deficits by more than $3 trillion over a decade.
Below is a brief summary of the President’s proposal for several key agencies:
- For FY 2013, the Defense Department's budget is $525.4 billion or 1 percent less than FY 2012. The most significant change in the budget is reflected in the overseas contingency operations budget, which funds troop levels in Iraq and Afghanistan. As a result of scheduled withdrawals from each theater, the overseas contingency operations budget is reduced by $27 billion (to $88.5 billion).
- The proposed budget increases education spending to $69.8 billion in 2013, which is 2.5 percent more than the current year’s budgeted amount of $68.1 billion. Key initiatives like Race to the Top, will see an increase of $300 million for a total of $850 million next year. The additional funds would support state and school district reforms and programs aimed at closing achievement gaps between students of different racial and economic backgrounds.
- Also proposed is increased funding for the Energy Department by 3.2 percent to $27.2 billion. Increases would go toward programs funding clean energy, research and development, and advanced manufacturing. As in the past, the Administration has again proposed eliminating tax incentives worth about $4 billion a year for oil and gas companies.
Health and Human Services Department
- The overall funding level for the Department of Health and Human Services ($76.4 billion) would only increase slightly in 2013.
- Within the proposed budget amount the Administration has proposed some significant changes in the ways those funds are allocated. A top priority is funding the 2010 health reform law and includes assisting states with developing the infrastructure needed to set up health exchanges, or state-based marketplaces through which individuals and small businesses will be able to purchase private health insurance with federal subsidies beginning in 2014. Support for these efforts contributes to a $993 million, or 26 percent increase in funding, for the Centers for Medicare and Medicaid Services (CMS) — the agency with primary responsibility for carrying out the health care law.
Mandatory and discretionary federal transportation funding would increase by about 2 percent, or by $1.4 billion, with major investments in highways and public transportation. The key component of the plan is a six-year, $476 billion surface transportation plan, with $47 billion spent over six years to develop high-speed rail projects. The Administration sees the transportation plan as the best opportunity it has for creating jobs within the next fiscal year.
Federal Communications Commission
- FY 2013 funding is proposed to be cut by $7.4 million from 2012 levels. The proposed budget of $346.78 million focuses on the agency’s “continuing efforts to accelerate broadband deployment,” Universal Service Fund reform, and upgrading the FCC’s own systems and its engineering and technical expertise.
The following provides a summary of the key dates in the budget process:
February 13 — President Obama submitted his fiscal 2013 budget request to Congress.
February 14 — Congressional committees begin hearings on the President’s budget request.
April 15 — Statutory deadline (though it is often ignored) for Congress to complete its annual budget resolution. The resolution sets a limit on discretionary spending and may include instructions for a reconciliation bill. For each fiscal year through 2021, discretionary appropriations caps were established by the August 2011 debt limit law.
May 15 — The date after which the House may consider fiscal 2013 appropriations bills, even if a final budget resolution has not been adopted.
Mid-July — Target for the President to submit his mid-session review of the budget to Congress, including revised deficit estimates.
August 6 — Beginning of the Senate’s summer recess. This is considered the informal deadline for passing all 12 spending bills in both chambers.
September 10 — House and Senate return from summer recess with 18 days to negotiate their differences and clear all appropriations bills before the new fiscal year begins.
October 1 — FY 2013 begins.
House to Delay Vote on Highway Bill Until After Recess
Amending an earlier timeline Speaker Boehner announced last week that consideration of the surface transportation bill would not take place before Congress adjourned, as had originally been planned. Instead, the measure will be taken up sometime after the House returns on February 27. A key sticking point remains with the provision that would offset the costs associated with the bill. House Republicans have long advocated for the legislation to be paid for by expanding offshore oil and gas drilling throughout the United States including in the Arctic National Wildlife Refuge. Thus far, House Democrats have successfully blocked this course, arguing that such a provision would make the bill dead-on-arrival in the Senate.
Comprehensive Cybersecurity Legislation Introduced in the Senate
On February 14, Senate Homeland Security and Governmental Affairs Chairman Joseph Lieberman (I-CT) and a bipartisan group of Senators including top ranking Republican Susan Collins of Maine introduced a comprehensive cybersecurity bill aimed at protecting the U.S. from a catastrophic cyber attack while also trying to facilitate information sharing among industry.
The bill, entitled “The Cybersecurity Act of 2012,” immediately drew criticism from Republican Senators who argued that the decision by Majority Leader Harry Reid (D-NV) to use his parliamentary authority to circumvent the committee process meant that Senators would not have the time to properly consider and weigh-in on the issues involved. Reaction to the bill was mixed. The Obama Administration praised it as an important step in protecting the nation from a cyber attack, while business groups such as U.S. Chamber of Commerce said that the legislation gave the government, particularly the Department of Homeland Security, wide-ranging authority.
Under the bill, the Department of Homeland Security would consult with the private sector to determine the systems most at risk, then designate, in each sector of the economy, such as energy or finance, what counts as “covered critical infrastructure.” In the event that the department finds that some of those systems are already protected adequately by other federal regulations or industry standards, nothing would be required. If the defenses in place within the private sector are found to be inadequate, the Department would work with them and others in the industry to develop performance requirements.
The legislation also contains significant information sharing provisions, including liability protections for private sector entities that share certain cyber threat information with others in the private sector and with the government.