|The “Good,” the Bad, and the Ugly of the Fiscal Cliff Deal
(January 28, 2013)
In the late night hours of January 1, 2013, Members of Congress were not celebrating the beginning of a new year. Instead, they were scrambling to approve legislation to prevent the nation from falling over the so-called fiscal cliff. While the final bill, known as the American Taxpayer Relief Act (ATRA), prevented the most immediate crisis, it also set the stage for even greater fights for education programs like TRIO in the months ahead.
The “Good” — Setting aside the various tax provisions that have dominated local press coverage, the only “good” (or, more accurately put, “not as bad”) part of the ATRA is its treatment of the automatic spending cuts known as “sequestration.” This bill delayed sequestration for two months — until March 1, 2013. Presumably, this was done to provide legislators with more time to come up with a better plan to achieve deficit reduction as most agree that an across-the-board cut is not desirable.
The bill also reduced the percentage of funding to be cut under the sequester from 8.2% to 5.1%. This would reduce funding to the U.S. Department of Education by about $2.6 billion. In terms of TRIO and GEAR UP, this would amount to funding cuts of $42.8 million and $15.4 million, respectively. While these sums are less than what TRIO and GEAR UP would experience under the previous sequester, they still would result in a loss of services to several thousand low-income students nationwide. Additionally, these cuts represent only a portion of the cuts enacted by the legislation.
The Bad — As mentioned above, the ATRA delayed and reduced the amount of the sequester. However, it did so, in part, by cutting the amount of funds available to fund the government for the rest of fiscal year 2013. More specifically, Congress reduced the amount of funding available for non-defense discretionary programs like TRIO and GEAR UP by $2 billion in FY 2013. This will impact the amount of funding available when Congress writes legislation to fund these programs for the remainder of the fiscal year. (You will recall that current law only funds the government through March 27, 2013. It is for this reason that the Department of Education — and, indeed, virtually all federal agencies — declined to spend any of the “new” money provided by the 0.6% across-the-board increase in last fall’s appropriations bill.)
The situation is further compounded by the fact that, in reducing the amount of the sequester, the law contemplated additional increases in revenues (i.e., more tax increases). While there may be some opportunity to raise revenues by closing certain tax loopholes, there is little appetite — particularly among Republicans — to increase taxes further. This means that legislators will look to make even more spending cuts in order to reduce the federal deficit.
The Ugly — In the backdrop of the continued fight over sequestration and spending cuts looms a familiar foe — the debt ceiling. Although the United States officially reached the debt limit at the end of 2012, the U.S. Treasury Department is currently engaging in measures that will allow the nation to meet its fiscal obligations until mid-February or early March. After that time, the government will need to raise the debt ceiling further. If it fails to do so, the nation will go into default, which will result in a lower credit rating and send our fragile economy back into a tailspin.
Congress is slated to pass — and the President to approve — a bill that would suspend the United States’ debt ceiling until May 19, 2013. At that time, Congress will raise the debt ceiling to whatever its current level may be at that time. It is quite likely that Congress will call for additional spending cuts to account for the increase in the debt ceiling. The last such agreement, struck in the spring of 2011, cut TRIO funding by $26.6 million.
Taken together, the sequester, FY 2013 appropriations, and the debt ceiling, may spell disaster for low-income students and the programs that serve them. Over the next several weeks, it is critical that members of the TRIO community flood their House Representatives and Senators with information about the success rates of their programs and students. Additionally, we must keep pressure on the White House to defend against any additional cuts to our programs. All TRIO supporters are urged to work closely with COE’s Government Relations team in making such outreach and also to plan to visit their legislators in Washington, D.C. during COE’s Annual Policy Seminar. If you have any questions or concerns, please contact Heather Valentine (email@example.com) or Kimberly Jones (firstname.lastname@example.org) by e-mail or phone at (202) 347-7430.