After 18 months of failed attempts by the president and Congress to reach an agreement to avoid sequestration, across-the-board federal budget cuts totaling $85 billion for the remainder of FY2013 went into effect at midnight March 1, 2013.
President Obama ordered implementation of the across-the-board cuts for all non-exempt budget accounts. According to the order, the sequester will apply to “new budget authority, unobligated balances of defense function accounts carried over from prior fiscal years, direct spending authority, and obligation limitations.”
Jeffrey Zients, Acting OMB director, sent a follow-up memo to agency heads notifying them of the sequestration order and sent Congress the required report on sequestration. In the memo, Zients said non-exempt defense discretionary programs will be reduced by 7.8 percent and nondefense non-exempt discretionary programs by 5.0 percent. Non-exempt Medicare spending (benefits are exempt) will be cut by 2 percent, other non-exempt nondefense mandatory programs by 5.1 percent, and non-exempt defense mandatory programs by 7.9 percent. However, in the letter to Congress accompanying the sequestration report, Zients said because the cuts will take place over only seven months the effective percentage cut for defense non-exempt programs would be 13 percent and for non-exempt nondefense programs 9 percent.
Zients advised agencies that the same percentage reduction will be applied to “all programs, projects, and activities within a budget account.
The OMB sequestration report provides OMB’s calculations of the reductions for each non-exempt budget account and a description and explanation of those calculations. OMB estimates that programmatic reductions of $85.3 billion are required for the remainder of FY2013. Defense discretionary accounts would be cut by $42.6 billion and mandatory accounts by less than $.1 billion. Nondefense discretionary accounts would be cut by $25.8 billion. Medicare would be reduced by no more than 2 percent ($11.3 billion) and other non-Medicare mandatory accounts by $5.5 billion).
Because final FY2013 appropriations have not yet been enacted, the calculated reductions “assume that budget accounts with discretionary appropriations are funded at the annualized level provided by the CR” plus funds provided in the Hurricane Sandy supplemental and any enacted FY2013 advance appropriations. The report identifies reduction estimates for over 1,200 defense and nondefense accounts.
With sequestration in effect, Congress will now turn its attention to the FY2013 Continuing Resolution (CR). The CR runs out on March 27 and both Congress and the president seem determined to avoid a government shutdown. With a congressional spring recess set to begin on March 22, work is expected to begin this week on some kind of appropriations legislation that would fund the government through the end of the year.
The House is reported to be preparing a FY2013 appropriations bill for the Department of Defense and Veterans Affairs (the DoD and Military Construction/VA appropriations bills) that includes a year-long CR for other agencies and sets overall funding at the sequester-adjusted level. The bill is expected to provide agencies some flexibility in implementing sequestration.
The Senate Appropriations Committee appears to be working up an omnibus appropriations bill that includes all twelve spending bills. The Senate bill would likely set an overall FY2013 funding total that does not reflect sequestration cuts.