The Treasury Department said March 4 that an 8.7% haircut will apply to Treasury cash grants paid for the remainder of this fiscal year due to sequestration.
The fiscal year ends on September 30.
A new haircut percentage will have to be calculated for grants paid after that, assuming sequestration remains in effect.
Any project that received an award letter from Treasury before March 1 will not be affected. Sequestration does not apply to any grant that was an “obligated balance” before sequestration went into effect on March 1. A grant is an obligated balance when Treasury formally notifies a project that a grant in $X amount has been approved for payment.
The 8.7% haircut will apply to grants for which award letters are received during the period March 1 through September 30 this year.
The Office of Management and Budget said in a report to Congress late on March 1 that it is projecting $3.671 billion in grants to be paid in fiscal 2013 from which sequestration requires $187 million in savings. According to the OMB report, the haircut percentage in 2013 would have been only 5.1% if 2013 had been a full year, but a larger haircut is required from remaining 2013 grants since only seven months remain in the fiscal year to achieve the full savings.
Sequestration originally required $109 billion in spending reductions in each of nine years starting in 2013. It was originally scheduled to take effect on January 2, 2013. However, as part of the fiscal cliff deal on January 1, Congress agreed to $24 billion in specific spending cuts and tax increases to pay for a two-month delay to March 1.
That left $85 billion in across-the-board spending cuts for the remainder of 2013.
The required spending cuts will be $109 billion for fiscal 2014, but spread over 12 months.
Congress could still decide to suspend sequestration at some point later this year, but the chances of that happening soon are receding. Attention had been focusing on March 27, which is the date the government will run out of general spending authority. However, Congress and the Obama administration appear likely to agree to an extension of general spending authority through September 30 to avoid another immediate budget showdown.