PCPID Quarterly Meeting: September 26–27, 2011

Overview of the Budget Control Act and Implications for People with Intellectual Disabilities

Richard Kogan, Senior Fellow, Federal Fiscal Policy, Center on Budget and Policy Priorities
Paul Van de Water, Ph.D., Senior Fellow, Federal Fiscal Policy, Center on Budget and Policy Priorities

The Center on Budget and Policy Priorities is a nonpartisan organization that works on behalf of low-income individuals. According to Mr. Kogan, the Budget Control Act is a partial resolution of the debt limit crisis in the spring and summer of this year. It has two parts. First, it dealt with votes in Congress on a Constitutional Balanced Budget Amendment and allowed an increase in the debt limit, to avoid an immediate monetary crisis was until 2013. Second, it set two rounds of budget cuts in place. Round one limited the money that the Appropriations Committee could appropriate for the next ten years and divided that statutory ceiling between defense-related activities and non-defense activities. The non-defense ceiling is about 6 percent less than current funding levels. Because the Appropriations Committee will decide how to allocate the cuts, PCPID will need to persuade them to minimize cuts to discretionary programs for people with ID. Cuts have historically meant that all ongoing programs suffered about equally, so programs for people with ID will likely be affected. Round two mandates an additional $1.2 trillion. This can be done by lowering the caps further, cutting entitlement programs, and raising revenues. Mr. Kogan explained the legislative process surrounding a bill from the JSC. Due to the possibility that the JSC may not to reach a consensus, a backup system was created to serve as an incentive for cooperation and a remedy for potential failure. If the joint committee process achieves less than $1.2 trillion in savings, more spending cuts will automatically go into effect to make up for the short coming. These cuts will be evenly divided between defense and non- defense programs, mostly affecting discretionary appropriation. The defense caps will be lowered starting in 2013, the first year that automatic sequestration would occur, running through 2021. Non-defense caps will be further lowered. Certain entitlements will be automatically cut, and there is no discretion about how the President will order those cuts. An estimated $123 billion will come out of Medicare, through a cut of 2 percent in reimbursements to providers and plans. There will not be cuts on beneficiaries. This may actually benefit beneficiaries because the cost of premiums to buy Medicare Part B will be slightly lower. Other non-exempt mandatory programs will be cut by an estimated 9 percent. Mr. Kogan advised that most mandatory programs are exempt. Non-exempt programs include basic state grants, Title 20 grants to states for social services and vocational rehabilitation. These will be cut by an estimated 9 percent if there are no joint selection committee savings. As mentioned before, non- defense discretionary programs will be capped by 6 percent in 2012, growing to 9 percent by 2021. This means that, by 2013, they would reach 13 percent off of existing funding and 14 percent by 2021. Mr. Kogan went on to explain how he reached these percentages. Depending on what the public wants, these percentages may not be strictly adhered to over the course of the decade.

Mr. Kogan showed a slide describing different sequestration outcomes, based on the amount that the JSC is able to save. The higher the savings from the JSC, the lower the cut percentages.

Mr. Van de Water continued the presentation addressing the Budget Control Act and implications of possible to supports and current benefits for people with ID.  He began by stating that programs for persons with disabilities are seriously threatened by cuts. Many programs are exempted from sequestration, but not possible cuts from the JSC. If the JSC produces a package of recommendations, it will almost certainly include cuts to Medicare and will likely include cuts to Medicaid as well. Hopefully, there would be no significant cuts to SSI. All federal spending programs are under serious threat. The Committee should think about the big picture, not just individual programs. Everything needs to be on the table, including tax increases, as in the President’s recent proposal. Unless revenue increases are included in the final package, cuts in spending will be severe.

Mr. Van de Water note that two points need to be emphasized in the case for revenue increases. First, income growth in the bottom 90 percent of the population over the last thirty years has been roughly stagnant, but in the top 1 percent growth has been large. This implies room for upper income individuals to share in reducing deficits. Spending cuts mainly affect middle and lower income individuals. A balanced package can only be put together with the inclusion of revenue increases. The second point is the fact that federal income taxes are currently quite low compared with recent history.

Mr. Van de Water expressed belief that exaggeration about the growth of federal disability programs may make these programs a target for cuts. He added that while discussion has focused mainly on Social Security disability programs and SSI, exaggeration could impact all disability programs. Much of the recent growth in Social Security and SSI reflects the aging of the population, increasing the percentage of the population insured for disability benefits and the number of workers in their disability-prone years. There has also been an increase in proposals for work requirements in disability programs. A recent proposal included work requirements for both adults with disabilities and parents of children with disabilities in the SSI program. Other proposals would turn SSI back to the states. Some have suggested using block grants to make programs more efficient. Given the current budgetary environment, proposals for block grants are not supposed to be neutral with regard to the level of spending, but are a way of cutting federal and state spending. Other proposals have suggested providing services rather than cash to the families of children with disabilities, limiting decision-making opportunities for individuals with disabilities.

(Presenter-Committee Dialogue)

Clay Boatright requested more information about the proposed work requirements. Dr. Van de Water explained that some people view the work requirements and time limits in TANF as a good model for SSI. TANF worked well during prosperous economic times. Now that jobs are much harder to find, the idea of work requirements needs to be reevaluated.

Deborah Spitalnik talked about PCPID’s previous recommendation to maintain SSI cash benefits, which had implications for the Social Security Administration. She stated that this example illustrates the current policy environment and demonstrates a way to reach beyond the requirements of the report and advise other agencies. Dr. Spitalnik noted that SSI is an important issue because it supports people with ID in living with their families and prevents institutionalization due to financial hardship. In order to avoid institutionalization, SSI needs to be protected. Carol Wheeler added that, if individuals with disabilities are driven into institutions, costs will go up as a result.

Peter Berns commented that the least damaging scenario is one in which no agreement is reached, automatic sequestrations occur, and the Bush tax cuts expire. When the Bush Tax Cuts expire, new revenue will become available and another large budget dispute will likely ensue.

Mr. Kogan pointed out that the sequestration would occur in January of 2013, at the same time as the next debt limit crisis and the expiration of the Bush tax cuts. Therefore, the next Congress and President will be in a position to leverage certain supports for people with disabilities against one another and potentially eliminate some of those supports. Even if the Bush tax cuts did expire, it would take legislation to apply any additional funds to any budget holes.

Mr. Van de Water added that no proposal from the JSC is preferable to a bad proposal. From an economic perspective, it does not matter whether cuts are automatic or enacted by the JSC.

Chairman Brett voiced belief that doctors would stop accepting patients with disabilities if Medicare and Medicaid was cut by 2 percent on the service provider end. Mr. Kogan added that the 6 percent cut enacted in other discretionary programs could contribute to the same type of problem among those programs. He also noted that the percentage will likely increase to 13 or 14 percent if the JSC does not propose another solution or 10 to 30 percent if it does.

Chairman Brett discussed why the JSC will likely not be able to come to a compromise. He also asked how much of the $900 billion will start taking effect in the FY12 budget. Mr. Kogan did not have the numbers or dollar amounts, but the amount is approximately a 6 percent cut.

Mark Gross asked how the expiration of the 2013 Bush tax cuts would translate into revenue. Mr. Kogan answered that the value of the cuts is about 2 percent of GDP or approximately $300 billion per year at current levels. Mr. Gross then asked that Mr. Van de Water translate his slide with the growth over the past six decades from percentages into actual income, particularly the income for the top 1 percent. Mr. Van de Water offered to send the income cut offs to staff for transmission to Committee members. The increase for the top 1 percent was 280 percent, which translates to a huge amount of actual income, illustrating why those with higher income can afford to pay more in taxes. These individuals are becoming much richer and are paying moderately higher taxes, causing their after tax income to explode.

Carl LaMell inquired whether the 2 percent cut to Medicare would be a one-time or yearly decrease of 2 percent. The cut will total 2 percent and will not increase beyond that point.

Deborah Spitalnik pointed out that the lack of growth at the lower end of the economy also represents growth in the number of children living in poverty. She stated that the Committee has not focused on programs that prevent ID, and it is well within the Committee’s purview to do so.

Mark Gross asked if there was a way to get figures showing the dollar amounts of program cuts and revenue enhancement. The revenue enhancement figures will likely be higher. Mr. Kogan answered that that information is already available to some extent and explained how that figure could be calculated. Mr. Gross clarified that he was talking about calculating the cuts to specific programs. Mr. Kogan explained that most of the programs of concern to PCPID are exempt from automatic cuts. Clay Boatright agreed that this was a good framework on a macro level and suggested including the number of people that would be affected by cuts to each program. He also voiced his concern that a suggestion to increase revenues would politicize the report when the issues related to disabilities are largely bipartisan in nature.

Carol Quirk asked whether the Committee could get data, by race, on the impact of poverty on disability. Mr. Van de Water suggested that HHS staff was in a better place to provide that information, but poverty rates are certainly higher among selected racial and ethnic groups. Sharon Lewis added that PCPID could get this information from census data. The Committee may even be able to gather information about specific programs to some degree, as Clay Boatright suggested. The difficulty is that each state prioritizes in terms of optional services, so it becomes exemplary but does not have a clear if-then relationship. The Committee, however, can still talk about some of the scenarios and their real impact.

Micki Edelsohn suggested trying to contact other Congressmen or Representatives who could influence JSC members rather than sending a report to the JSC, which is likely to become deadlocked. Chairman Brett agreed, but said that the mandate was to report to the President. Mr. Kogan advised PCPID not to write anything in the report that could be misused or misinterpreted to the Committee’s detriment.

Mr. Kogan and Mr. Van de Water will be happy to answer follow-up questions from PCPID in the next few weeks.

Mr. Brett welcomed attending who had recently joined the meeting, including Sue Swenson, Assistant Secretary in the Office of Special Education and Rehabilitative Services at the Department of Education, and Marty Ford, Director of Public Policy for the ARC.

(Brief recess)