PRESIDENT'S BUDGET CALLS FOR DEEP CUTS IN A WIDE RANGE OF DOMESTIC

PRESIDENT'S BUDGET CALLS FOR DEEP CUTS IN A WIDE RANGE OF DOMESTIC PROGRAMS:
Cuts Start in 2008 and Grow Deeper Over Time

by Sharon Parrott and Matt Fiedler

Center on Budget and Policy Priorities, February 8, 2007

http://www.cbpp.org/2-8-07bud.htm

Under the Administration's budget, domestic discretionary programs -- the
programs that are funded each year through the annual appropriations
process, other than defense and international programs -- are slated for
sizable reductions over the next five years. The budget calls for these cuts
to start in 2008, when domestic discretionary programs as a whole would be
funded below a freeze of the levels provided for 2007 in the full-year
continuing resolution now moving through Congress. [i ] The cuts would then
grow deeper each year after 2008, and would come from almost every part of
the domestic budget. The largest cuts would come in 2012, when domestic
programs would be cut $34 billion, or 7.6 percent, relative to the 2007
funding level, adjusted for inflation. (See Figure 1)

Data from back-up information provided by the Office of Management and
Budget (OMB) to the Congressional Budget Committees (but not made readily
available to the public) show that key domestic priority areas -- including
areas such as education, environmental protection, veterans health care, and
medical research -- would be slated for large funding cuts over the 2008 to
2012 period.

While the budget documents the Office of Management and Budget (OMB)
released on February 5 spell out the President's proposed funding levels for
each discretionary program for fiscal year 2008, they do not specify the
funding levels that the President is proposing in discretionary programs for
years after 2008. [ii] Breaking with normal budgeting procedures, the
Administration has chosen for each of the past three years not to show in
its standard budget materials the funding levels that it is proposing for
each discretionary program or "budget account" for years after the coming
fiscal year (in this case, for years after fiscal year 2008).

Nevertheless, some important information on the Administration's planned
cuts in discretionary programs in the years 2009-2012 is available. Data are
available on the overall funding levels that the President is proposing for
each of the next five years for the discretionary programs in each of 15
broad budget categories in the budget, known as "budget functions." Data on
the overall discretionary funding levels the Administration is proposing
also are available for each of the 74 smaller budget categories known as
budget "subfunctions." These data come from OMB "back-up" documents
provided to the Congressional Budget Committees (but not made readily
available to the public).

In some cases, the reductions that the President's new budget calls for
would be on top of cuts that have been made in domestic discretionary
programs over the past few years. For example, funding for child care and
Head Start has essentially been frozen since about 2002, with no adjustment
for inflation. In certain other areas, such as education initiatives
associated with the No Child Left Behind Act and biomedical research, the
cuts proposed for the next five years would undo some or all of the
increases made earlier under this Administration.

By failing to identify how the large domestic discretionary program cuts
that the Administration is proposing for years after 2008 would be achieved,
the Administration has made it difficult for policymakers and the public to
assess some of the trade-offs and priority choices upon which its budget is
based. These priorities become more apparent, however, when the proposed
reductions in domestic discretionary programs the budget calls for in
2009-2012 are examined by program area

The Domestic Discretionary Cuts Would be Widespread

Under the budget, discretionary programs in nearly all domestic program
"functions" and "subfunctions" -- with only a few exceptions, such as the
"general science, space, and technology" budget function, one set of
veterans programs, and the subfunction containing the Strategic Petroleum
Reserve -- would be slated for cuts over the next five years. Figure 2 and
Table 1 show the cuts in a number of areas. The cuts include: Environmental
Protection: Environmental programs would be slated for some of the deepest
cuts in the budget. The President proposes to cut overall funding for
discretionary programs in the Natural Resources and Environment budget
function by $2.5 billion in 2008 and by $20.1 billion over the 2008-2012
period, relative to the expected fiscal year 2007 funding level adjusted for
inflation. The cuts would start at 8 percent in 2008 and reach 15 percent in
2012.

Every subcategory of programs in this budget function would be cut,
including funding for water resources, conservation and land management,
recreational resources such as national parks, and pollution control and
abatement. For example, funding for pollution control and abatement -- which
includes, among other things, grants to states and localities for projects
to improve water safety and reduce water pollution -- would be cut by $706
million in 2008 and by $1.4 billion, or 15.7 percent, in 2012.

Elementary, Secondary, and Vocational Education: This subfunction includes
funding for K-12 education, vocational and adult education, and special
education. It includes funding for the No Child Left Behind initiatives,
including Title I funding that provides schools with additional resources
for disadvantaged children, as well as special education funding. The
President's budget would cut overall funding for these education programs by
$9.9 billion over the next five years, relative to the expected fiscal year
2007 funding level adjusted for inflation. In 2012, funding for these
programs would be reduced $2.8 billion, or 6.8 percent. As shown in Figure
3, these cuts would largely roll back the expansions in these education
programs that were enacted earlier this decade. Health care: The
discretionary programs in the budget subfunction known as "health care
services" include community health centers, HIV/AIDS programs (for U.S.
residents), maternal and child health programs, the Indian Health Service,
substance abuse and mental health treatment, and domestic bioterrorism
efforts. This subfunction is slated for $4.1 billion in cuts over the next
five years, relative to the expected fiscal year 2007 funding level adjusted
for inflation. The cuts would reach $1.2 billion, or 5.6 percent, in 2012.
Hospital and Medical Care for Veterans: The President proposes to increase
funding for these programs by nearly $1.4 billion (or 4 percent) in 2008.
But the increase would only be temporary. The President proposes to cut the
programs in this subfunction in each subsequent year, from 2009 through
2012; in each of those years, the programs would be funded at levels below
the amount provided for 2007, adjusted for inflation. In 2012, the cut would
be $2.7 billion, or 7 percent. [iii ]

Employment and Training Services: The President's budget would cut the
inflation-adjusted funding for "employment and training services," the
subfunction that includes funding for programs under the Workforce
Investment Act (such as one-stop career centers, training for dislocated
workers, employment programs for youth, and the employment service), by $1.2
billion in 2008 and $5.8 billion over the next five years. The cut would
reach 17 percent in 2012. The proposed funding level for programs in this
subfunction falls below a freeze of the expected fiscal year 2007 funding
level in every one of the next five years. As shown in Figure 4, the
President's proposed cuts would come on top of the already deep cuts imposed
since 2001.

The President would achieve the savings in this area in 2008 by
consolidating, into a single grant to states, the funding now provided for
adult training, training for dislocated workers, youth training, the
employment service, and certain administrative functions -- and by funding
the consolidated grant at a significantly lower funding level than the
programs being consolidated currently receive. Criminal Justice Assistance:
The "criminal justice assistance" subfunction, which includes programs that
provide funding to state and local governments for law enforcement efforts,
is slated for substantial cuts starting in fiscal year 2008. Over the
five-year period, funding would be cut by $9.4 billion, relative to the
expected 2007 level adjusted for inflation. Funding would be cut by more
than 45 percent in each of the five years.

To achieve these savings, the Administration is proposing to consolidate 20
law enforcement grant programs collectively known as "state and local law
enforcement assistance grants" into three grant programs with substantially
less overall funding. In fiscal year 2008, funding for the three programs
would total $415 million, $660 million below the expected fiscal year 2007
funding level for the programs that would be consolidated even before
adjusting for inflation. The Administration's budget calls for reductions in
other criminal justice programs as well, including funding for the Community
Oriented Policing Services (COPS) program and funding for violence against
women prosecution and prevention.

Community Development: The Administration proposes deep cuts in the
community development category, which includes the Community Development
Block Grant (CDBG) and some smaller programs. The budget proposes to cut
overall community development funding by $1.2 billion -- or by more than
one-quarter -- in 2008, and by $6.9 billion over the five-year period,
relative to the expected 2007 level, adjusted for inflation. The
Administration also is proposing to target the reduced CDBG funding that
would remain more heavily on low-income communities. Health Care Research
and Training: The "health care research and training" subfunction is largely
composed of funding for the National Institutes of Health. Funding for NIH
increased markedly from 1998 to 2005, but the President proposes significant
reductions in this area in his new budget. Under the proposal, funding for
this subfunction would fall by $758 million in 2008 and by $9.8 billion over
the next five years, relative to the expected fiscal year 2007 funding level
adjusted for inflation. The cut in 2012 would reach 8 percent. As shown in
Figure 3, these cuts would essentially roll back funding increases enacted
earlier this decade. Social Services: The largest program in the "social
services" subfunction is Head Start, which comprised 58 percent of the
subfunction in fiscal year 2006. This subfunction also includes several
programs for abused and neglected children, as well as programs funded under
the Older Americans Act (such as nutrition programs for the elderly and
caregiving programs) and programs funded under the Community Services Block
Grant (which funds local community action agencies). The budget proposes to
cut funding for the programs in this subfunction by by $8.3 billion over the
next five years, compared to the expected fiscal year 2007 funding level
adjusted for inflation. The cuts would begin in 2008 and would be achieved
in part by eliminating the Community Services Block Grant and by funding
Head Start and aging programs slightly below the expected fiscal year 2007
level before adjusting for inflation (i.e., slightly below a freeze level).

Table 1: Proposed Funding Reductions for Selected Budget Sub-Categories
(President's Proposal Relative to Expected FY 2007 Levels Under H.J. Res.
20, Adjusted for Inflation)

Budget Sub-Category : Community Development
Change in 2008, Billions of Dollars: minus $1.20
Change in 2008, Percent: minus 25.50%
Change in 2012, Billions of Dollars: minus $1.50
Change in 2012, Percent: minus 30.10%
5-year change, 2008-2012, billions of dollars: minus $6.90

Budget Sub-Category : Elementary, secondary, and vocational education
Change in 2008, Billions of Dollars: minus $0.50
Change in 2008, Percent: minus 1.30%
Change in 2012, Billions of Dollars: minus $2.80
Change in 2012, Percent: minus 6.80%
5-year change, 2008-2012, billions of dollars: minus $9.90

Budget Sub-Category : Pollution Control and Abatement
Change in 2008, Billions of Dollars: minus $0.70
Change in 2008, Percent: minus 8.80%
Change in 2012, Billions of Dollars: minus $1.40
Change in 2012, Percent: minus 15.70%
5-year change, 2008-2012, billions of dollars: minus $5.50

Budget Sub-Category : Health care research and training
Change in 2008, Billions of Dollars: minus $0.80
Change in 2008, Percent: minus 2.50%
Change in 2012, Billions of Dollars: minus $2.60
Change in 2012, Percent: minus 8.00%
5-year change, 2008-2012, billions of dollars: minus $9.80

Budget Sub-Category : Health care services
Change in 2008, Billions of Dollars: minus $0.20
Change in 2008, Percent: minus 0.90%
Change in 2012, Billions of Dollars: minus $1.20
Change in 2012, Percent: minus 5.60%
5-year change, 2008-2012, billions of dollars: minus $4.10

Budget Sub-Category : Hospital and medical care for veterans
Change in 2008, Billions of Dollars: $1.40
Change in 2008, Percent: 4.00%
Change in 2012, Billions of Dollars: minus $2.70
Change in 2012, Percent: minus 7.00%
5-year change, 2008-2012, billions of dollars: minus $5.10

Budget Sub-Category : Other Income Security (includes energy assistance,
child care
Change in 2008, Billions of Dollars: minus $0.40
Change in 2008, Percent: minus 5.40%
Change in 2012, Billions of Dollars: minus $0.90
Change in 2012, Percent: minus 10.80%
5-year change, 2008-2012, billions of dollars: minus $3.60

Budget Sub-Category : Training and Employment
Change in 2008, Billions of Dollars: minus $1.20
Change in 2008, Percent: minus 16.80%
Change in 2012, Billions of Dollars: minus $1.20
Change in 2012, Percent: minus 16.60%
5-year change, 2008-2012, billions of dollars: minus $5.80

Budget Sub-Category : Social Services (includes head start, programs for
abused and neglected children, aging)
Change in 2008, Billions of Dollars: minus $1.60
Change in 2008, Percent: Note a.
Change in 2012, Billions of Dollars: minus $1.80
Change in 2012, Percent: minus 14.30%
5-year change, 2008-2012, billions of dollars: minus $8.30

Note a. The Administration achieves some of its savings in this subfunction
in 2008 by cutting the Social Services Block Grant, a mandatory program, and
counting the savings as discretionary savings. This makes it difficult to
compute a meaningful percentage reduction for the subfunction in this year.
(This is not an issue after FY 2008 when the cut in SSBG is accounted for on
the mandatory side of the budget.) Excluding the cut in SSBG, the
discretionary programs in this subfunction would be cut by 9.2 percent in
2008 under the President's proposal.

table end

"Other Income Security:" This subfunction includes discretionary child care
funding, funding for the Low-Income Home Energy Assistance Program (LIHEAP),
and administrative costs associated with operating the Supplemental Security
Income (SSI) program for poor elderly individuals and people with
disabilities. This subfunction is slated for $434 million in cuts in 2008
and $3.6 billion in reductions over the next five years. In 2008, the
reductions would stem from a large cut in energy assistance for low-income
Americans, most of whom are elderly, and from a continuation of a long-term
freeze on discretionary child care funding. [iv ] The reduction in LIHEAP
would be particularly sharp; funding for LIHEAP in 2008 would fall $420
million, or 19 percent, below the expected fiscal year 2007 level adjusted
for inflation (and 17.5 percent below a freeze at the FY 2007 level). This
would mean that despite the increases in energy costs over the last several
years, LIHEAP funding would fall to its lowest inflation-adjusted level
since 1999.

It may be noted that a substantial number of these proposed reductions would
represent a cost-shift to states, which would be presented with the choice
of cutting services in these or other areas or raising taxes to cope with
the funding shortfalls these reductions in federal funding would create.

Conclusion

The President's budget calls for substantial reductions in a range of
domestic discretionary programs. In many key domestic priority areas --
including education, the environment, and state and local law enforcement --
funding in fiscal year 2008 would fall below the expected fiscal year 2007
level, adjusted for inflation.

The cuts would then grow deeper in the years after 2008. The cuts would
total $114 billion over five years, and would reach $34 billion in a single
year by 2012, relative to the expected fiscal year 2007 funding levels
adjusted for inflation.

At the same time that the budget proposes reductions in most domestic
discretionary program areas, it proposes to make permanent virtually all of
the tax cuts enacted in 2001 and 2003. The budget's priorities are clear:
extending virtually every tax cut, including those that benefit the most
affluent Americans, takes precedence over maintaining current levels of
investment in education, biomedical research, and the environment; and over
maintaining current levels of services and benefits in the low-income home
energy assistance program upon which many poor seniors depend, in the Head
Start and child care programs for low-income children, in programs that
assist state and local governments in combating crime, and even in veterans'
health care programs.

The cost of extending the tax cuts would be $317 billion in 2012 alone. [v ]
This is several times the amount that would be saved from the entire
universe of cuts in domestic discretionary program cuts that the President
proposes for that year. It also is several times larger than the total
domestic program reductions the President is seeking on the mandatory and
discretionary sides of the budget combined.

End Notes:

[i] Discretionary funding for all programs outside of the Departments of
Defense and Homeland Security is currently provided by a temporary
continuing resolution, which is scheduled to expire on February 15. In this
analysis, however, the 2007 funding level for domestic programs is taken as
the funding provided in H.J. Res 20, passed by the House on January 31. That
legislation, which would supersede the current continuing resolution and
provide full-year appropriations for programs outside of the defense and
homeland security departments, is being considered by the Senate at this
time and is likely to be enacted into law without major changes. In this
analysis, proposed cuts in 2008 and subsequent years are calculated by
comparing the proposed funding levels in the budget for those years with the
2007 level in H.J. Res.20, adjusted for inflation.

Note: The administration has said that its budget calls for a one percent
increase in funding for domestic programs for 2008, but it derives this
percentage figure by comparing its proposed level of funding for domestic
discretionary funding in 2008 to an assumed funding level for 2007 that is
below the amount provided by H.J. Res 20. In addition, in comparing its
proposed 2008 level to the level assumed for 2007, the Administration does
not adjust the 2007 level for inflation. In actuality, the overall level of
funding that the administration is proposing for domestic discretionary
programs in 2008 is $1.5 billion below the level for 2007 reflected in H.J.
Res. 20 even before inflation is taken into account, and $12.9 billion below
that level after adjustment for inflation.

[ii] In the past, the back-up tables to the budget that were provided by
this and previous administrations included proposed funding levels for each
budget account for each year that the budget covered. Budget accounts often
consist of a single program but sometimes include multiple, related
programs.

[iii] Note that the cost of providing health care to veterans is likely to
rise faster than the overall inflation rate because health care inflation is
higher than the overall inflation rate.

[iv] For more information on the impact of the funding reductions on the
number of low-income children who could receive child care assistance, see
"Families Forgotten: Administration's Priorities Put Children Low on the
List," by Danielle Ewen and Hannah Matthews, Center for Law and Social
Policy,

http://www.clasp.org/publications/2008_budget_child_care.pdf,

February 2007.

[v] This cost reflects the cost of extending the President's tax cuts,
assuming Alternative Minimum Tax relief is continued. See Aviva Aron-Dine, "
Extending the President's Tax Cuts and AMT Relief Would Cost $3.5 Trillion
Through 2017," Center on Budget and Policy Priorities, January 31, 2007, p.
3.

KEY FINDINGS IN THIS REPORT:

* Information the Administration has provided to Congress but has not made
readily available to the public shows that its new budget would make large
cuts in key domestic priorities between 2008 and 2012.

* Environmental programs would sustain some of the biggest cuts. Funding
for pollution control, for example, would be cut by a total of $5.5 billion
over the next five years (relative to the expected 2007 funding level
adjusted for inflation).

* K-12 and vocational education would be cut by $10 billion over five
years.

* The part of the budget that includes community health centers, domestic
HIV/AIDS programs, and maternal and child health would be cut by $4 billion
over five years.

* Funding for hospital and medical care for veterans would be increased
next year but cut in each of the four years after that.

To ask questions, or send comments, write to

Deputy Director of Communications

bazie@cbpp.org

Center on Budget and Policy Priorities

820 First Street, NE, Suite 510

Washington, DC 20002

Ph: (202) 408-1080

Fax: (202) 408-1056

Voice: 202-408-1080

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Posted by Sylvie K.