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Congress Avoids Fiscal Cliff
This week, the U.S. House of Representatives and U.S. Senate passed a revised version of a Republican-sponsored resolution (H.R. 3743) by a margin of 314-117. Republicans supported the legislation by a vote of 149-71, while Democrats had a margin of 165-46 voting in support. Oregon Congresswomen Susanne Bonamici and Val Hoyle opposed the bill, with the remaining delegation members supporting it. The Senate passed the legislation with 15 Republicans and two Independents joining 46 Democrats for 63 votes. There were 36 votes in opposition, with 4 Democrats joining 33 Republicans. Senator Ron Wyden supported the bill and Senator Jeff Merkley opposed it. The legislation had been part of 24/7 negotiations between Republican and Democratic leadership and President Biden for the last few weeks. While opposition remains, the country benefited with a debt ceiling agreement, reduced spending and a two-year time commitment that does not run out until January of 2025. The following is a summary provided by the National League of Cities (NLC), which successfully prevented a clawback of direct funding to local governments.
- This bill creates a suspension of the debt ceiling until January 1, 2025. This will take this fiscal football out of the hands of Congressional lawmakers until the 2024 post-election lame-duck session. This will make sure that the debt ceiling does not become a campaign issue that bubbles up during 2024.
- Discretionary spending over 10 years is cut by $1.3 trillion, according to the Congressional Budget Office (CBO). Interest payments on the debt would be reduced by $188 billion over that period, for a discretionary savings of $1.5 trillion, according to the CBO.
- Fiscal year 2023 spending levels are the new ceiling for fiscal year 2024 for non-defense spending. This means cities will not see a year-over-year increase in federal government spending, but at the same time, the $130 billion in appropriations cuts for non-defense spending proposed by the House Republicans in their opening offer did not materialize. In fiscal year 2025, the bill will increase spending levels by 1% for non-defense spending. Finally, the bill contains non-enforceable budget targets for the next four years, meaning spending for cities could see an increase in fiscal year 2026 and beyond.
- There is a clawback of funds from six Covid spending bills, including the American Rescue Plan Act. What the bill does NOT do is rescind money that was transferred from the Treasury Department under the State and Local Fiscal Recovery Funds (SLFRF) provision. Local government SLFRF monies, whether spent already or not, WILL NOT be rescinded. That money is considered obligated and not subject to rescission.
- The Inflation Reduction Act (IRA) provided money for increased customer service for the IRS-allowing more IRS employees to answer taxpayer calls during filing season. The bill cuts $10 billion of the $80 billion allocated in the Inflation Reduction Act over 8 years to the IRS, likely from IT funding and enforcement to help bolster fiscal year 2024 and fiscal year 2025 spending. This funding cut will not mean a return to lower levels of customer service.
NLC also provided some additional details related to their advocacy. These include the following:
Housing and Urban Development
Funding enacted in response to the COVID-19 emergency at the Department of Housing and Urban Development (HUD) will be subject to a small number of rescissions that, according to the Administration, will have negligible impact on program participants. HUD rescissions include emergency funding for project-based rental assistance, Section 202 Housing for the Elderly, Section 811 Housing for Persons with Disabilities, tribal housing, fair housing activities, and assistance to rural homeowners. Direct grants to local governments, including Emergency Rental Assistance program funds and emergency CDBG funds, are not among programs identified by the White House as subject to rescission, and so appear to be protected from cuts related to the debt ceiling. Tenant-based rental assistance (housing vouchers) enacted in response to COVID-19 are also protected from rescission.
Transportation
There are some rescissions to transportation allocations. There are several states that did not obligate all their transportation funds. The states of Louisiana (69%), Michigan (68%), and Massachusetts (54%) will lose access to hundreds of millions, while Oregon will be untouched, because everything was obligated.
Work Requirements
Additional work requirements were expanded to qualify for the Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps. Currently, adults ages 18-49 are limited to three months of SNAP benefits every three years unless they are working or in a work or training program at least 20 hours a week. Some individuals are exempt from this requirement, such as those who live with children in the household, those determined to be physically or mentally unfit for work, pregnant people, and others determined to be exempt from the three-month time limit. During the Public Health Emergency, (PHE), which ended on May 11, the three-month time limit was suspended.
The additional work requirements included in the bill for SNAP will phase in higher age limits for those work requirements, bringing the maximum age to 54 by 2025. The expanded work requirements have a sunset date of 2030. The new requirements also exempt those who are veterans, homeless or under 24 and aging out of the foster care system.
House Republicans pushed for work requirements to be added to the bill and messaged the addition as a win. However, the CBO estimates that a net of 78,000 new individuals will receive SNAP benefits even with expanded work requirements and that spending on SNAP will go up $2.1 billion (net) over 10 years. House Republicans believe that this analysis is not correct, and that the CBO is double counting veterans and others who will be newly exempt from work requirements.
The bill also includes expanded work requirements for the Temporary Assistance for Needy Families (TANF) program in most states. TANF provides cash assistance to families with children and is designed and implemented at the state level. Currently, states are required to ensure that 50% of TANF recipients are working, but states have the flexibility to reduce that threshold based on their caseload reduction as compared to 2005 levels. The bill passed by the House updates the comparison to 2015 levels, which means that more states will have to increase their work requirements to meet this threshold. States can also lower their work participation rates by increasing their state contribution to the program.
Permitting Reform
Local governments often find the National Environmental Policy Act (NEPA) procedural process to be cumbersome and inefficient. Administrative burdens alone can be overwhelming for local governments whose resources are limited. In general, the NLC supports efforts to modernize and streamline the NEPA process. Included in the bill is the BUILDER Act (H.R. 1577), which includes provisions to streamline NEPA, including:
- Codifying key elements of the One Federal Decision Framework, including development by the lead agency of a joint schedule, procedures to elevate delays or disputes, preparation of a single environmental impact statement and joint Record of Decision to the extent practicable.
- Setting deadlines for completion of NEPA review at one year for environmental assessments and two years for environmental impact statements, unless a deadline extension is agreed to by the project sponsor.
- Establishing page limits for environmental documents and paper reduction measures - 300 pages for complex projects and 150 pages for less complicated ones.
- These are the same streamlining provisions that were included in the House-passed energy bill (H.R. 1) and which NLC has supported in the past.
- The debt ceiling bill also modifies NEPA to redefine the scope of environmental reviews to include "reasonably foreseeable environmental effects" of proposed agency actions and a "reasonable range" of alternatives to the proposed agency action.
Student Loans
For municipal workers, the modifications made by the Biden Administration to allow more people working in government to qualify for Public Service Loan Forgiveness will not be rolled back. Additionally, the Administration's plan to forgive up to $20,000 in debt for some student loan borrowers remains intact. (However, a case is still pending before the Supreme Court on whether the Administration can forgive this debt.) What the deal does provide is that the Administration cannot further extend the pandemic-era freeze on student loan payments. The expiration of the pandemic emergency, which was the justification for the pauses, expired on May 11. What this will mean is residents who had used student loan payments to pay down debt or spend in local communities will now have less discretionary funds to spend in local communities.
Contact: Jim McCauley Legislative Director - jmccauley@orcities.org
Last Updated: 6/2/23
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