In a major break in the partisan gridlock that has paralyzed Congress, budget committee negotiators agreed to a two-year budget deal that provides sequester relief in FY2014 and 2015.
This agreement will provide the appropriations committees the total funding levels necessary for them to work on FY2014 appropriations bills before the current Continuing Resolution runs out on January 15, 2014.
Some are calling the deal struck by House Budget Committee chair Rep. Paul Ryan (R-WI) and Senate Budget Committee chair Sen. Patty Murray (D-WA) modest, small ball, unambitious, or even the deal that everyone hates. Even so, the deal is a bi-partisan agreement on a major fiscal issue and that alone is a major accomplishment in this gridlocked Congress.
Sen. Murray said the agreement “breaks through the recent dysfunction to prevent another government shutdown.” She called it a “step in the right direction that can hopefully rebuild some trust and serve as a foundation for continued bipartisan work.”
When the budget conference committee was charged with coming up with an agreement to replace sequestration under a very aggressive schedule, many that it would suffer the same fate as the so-called supercommittee. That committee failed to come up with a plan to avoid sequestration in the first place. But, this time Ryan and Murray were determined to avoid the supercommittee’s fate. They set reasonable and reachable goals from the beginning and kept the final deal making to themselves.
Strong and united support for the deal from these respected committee chairs will help House Speaker John Boehner (R-OH) and Senate Majority Leader Sen. Harry Reid (D-NV) guide passage of the agreement through the bitterly divided House and Senate chambers. Rep. Ryan issued a call to his fellow House Republicans asking “all my colleagues in the House to support it.”
Although there will be resistance from some Democrats (who wanted to extend unemployment benefits) and some Republicans (who wanted entitlement reform), the House is expected to approve the agreement this week and Senate next week. The president also voiced support for the deal calling it “a good first step.”
The proposed Bipartisan Budget Act of 2013 sets the funding level for discretionary spending at $1.012 trillion in FY2014, about half way between the $1.058 trillion in the Senate-passed budget resolution and $967 billion in the House-passed budget. The FY2015 spending level would be $1.014 trillion.
The deal doesn’t replace all sequester cuts, but it does provide $65 billion in sequester relief over two years, evenly divided between defense and nondefense programs. Discretionary spending for defense programs in FY2014 would total $520.5 billion. The Nondefense spending level would be $491.8 billion.
The lower sequester amount is offset by $65 billion in so-called “deficit reduction provisions,” including a combination spending cuts and higher user fees. The deal also extends the mandatory sequester through 2023, which saves an additional $28 billion that is used for deficit reduction.
Two major offsets under the agreement affect new federal employees and military retirees under 62, which together save $12 billion.
Federal employees hired after December 31, 2013, with less than five years of service, would pay 1.3 percentage points more in retirement contributions to the Federal Employee Retirement System (FERS), up from the current 3.1 percent. Current employees would see no change.
The cost of living adjustment for military retirees under age 62 would be calculated as inflation minus 1 percent. The change would be phased in with no change this year, a .25 percent decrease in December 2104 and a .5 percent decrease in December 2015.
The agreement raises the premiums that private companies pay to the Pension Guarantee Corporation to guarantee pension benefits. It also rescinds funds available in the Strategic Petroleum Reserve and limits the amount of interest payments to federal oil and gas lessees on royalty overpayments.
The deal increases Transportation Security Agency (TSA) aviation security fees, extends the collection of customs user fees through 2023, and allows the government to charge fees for conservation planning technical assistance.
Other provisions in the agreement limit the allowable federal reimbursement for a contractor’s employee compensation to $487,000 and allow the Office of Personnel Management (OPM) to offer a “self-plus-one” option in the Federal Employees Health Benefits program (FEHBP).