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THE ELECTION
Julia Martin, [email protected] & Manasevit,
PLLCFall Forum 2012
Key Players, Status of Education Funding, and Sequestration
Effect of Fiscal Issues on Education Funding Battles So Far Sequestration The “Fiscal Cliff” Where the Parties Stand on Policy The Election and What it Means
Agenda
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Effect of Fiscal Issues on Education
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Why it Matters
How do federal fiscal issues affect education? Control funding levels
Congressional appropriations determine support for federal programs
Part of policy debate Size/involvement of federal
government is still an open question Distract from other debate
Take time/momentum away from policyBrustein & Manasevit,
PLLC
Funding Battles So Far
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The 112th Congress
Politically divided Along party lines and within
parties Huge nationwide fiscal and debt
issues Lack of action on policy legislation Lack of substantive policy debate
on any issues Focus on party-line votes,
attacks Large turnover predicted for
November 2012 election Result: little motivation to address
critical issues
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FY 2012 Budget
Not a real budget – full-year Continuing Resolution
Completed almost three months late in December 2011
Narrowly avoided government shutdown Cut ED funding by $233 million in total
All programs subjected to 0.189% across-the-board cut
Some increases: IDEA, Title I Includes funding for President’s priorities
E.g. Race to the TopBrustein & Manasevit, PLLC
FY 2013 Budget
Bipartisan agreement to pass temporary spending measure
6-month continuing resolution (CR) keeps federal government running through March 2013
Extends current funding levels, plus 0.612% across-the-board spending increase
Spending increase now means cuts later? Remainder of FY 2013 budget will not be
finalized until spring 2013
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Budget Control Act
Passed August 2011 Temporarily raised Debt
Ceiling Reduced Congressional
appropriations spending caps by $891 billion over the next ten years
Created Congressional debt Supercommittee
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The Supercommittee: Not So Super
Tasked with cutting $1.5 trillion in spending over next decade by Thanksgiving 2011
If at least $1.2 trillion in cuts not agreed to by November 23, 2011, automatic cuts triggered
Total failure to come to an agreement Conflict over how to reduce debt – raising
taxes/revenues versus lowering spending Failure of Supercommittee means
automatic cuts through “sequestration”
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Sequestration
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Sequestration
Only intended as a threat – never meant to happen
Cuts take effect January 2, 2013 Automatic, across-the-board cuts for FY
2013 Little discretion for appropriators, agencies
Apply to FY 2013 federal spending numbers Could exacerbate effect of any cuts made in
FY 2013
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Sequestration Step by Step
Adjust total for interest to reflect lesser debt principal $1.2 trillion $984 billion
Divide by year from 2013 through 2021 $109 billion
Split function between defense and non-defense spending (about $54.5 billion each per year)
Take exempt programs out of the equation Spread cuts equally among remaining
programs in 2013 Cuts accomplished by reducing spending
caps in 2014 and beyond OMB estimates cuts for “non-defense
discretionary” funding including most education programs at 8.2%Brustein & Manasevit,
PLLC
The Impact of Sequestration
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Sequestration Exemptions
What’s exempt? Some low income assistance
programs: Social Security Medicaid TANF SNAP Most child nutrition and
commodity food programs Veterans benefits Pell grants, in first year
What’s not exempt? Most ED programs, defense
spending, among other itemsBrustein & Manasevit, PLLC
When Will Sequestration Happen? President Obama must issue a sequestration
order no later than January 2, 2013 Funds received by States July 2012 and earlier
are NOT subject to sequestration Advance funding received in October of 2012
will not be subject to sequestration when allocated BUT cuts will be calculated and applied to July
2013 funds Funding received in July of 2013 will be subject
to cuts After July 2013, cuts will be incorporated into
annual appropriationsBrustein & Manasevit, PLLC
Guidance on Sequestration
Overall: focus on repeal, not implementation
Pres. Obama in debate: sequester “won’t happen”
Business as usual Why?
Practical/legal concerns Political strategy
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Guidance on Sequestration - Agencies May 2012 report from GAO: No
workarounds for federal agencies Antideficiency Act: agencies can’t overspend
in anticipation of cuts Impoundment Control Act: agencies can’t hold
back on Congressionally appropriated funds in anticipation of cuts
“Agencies must carry out their appropriations … regardless of the possibility of spending reductions beginning in the second quarter of fiscal year 2013.”
September 2012 memo from OMB to federal agencies: business as usual for first half of fiscal year (“continue normal spending and operations”)Brustein & Manasevit,
PLLC
Guidance on Sequestration - States States sent out guidance in summer 2012
on how to prepare Texas: State will withhold 10% of funds Missouri: prepare two budgets
July 20 memo from ED to State chiefs: “there is no reason to believe that a sequestration would affect funding for the 2012-2013 school year…“[T]he potential for sequestration should not upset planning and hiring decisions for the immediately upcoming 2012-13 school year…there is little reason to delay hiring.”
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The Search for Plan B
Congress must explicitly act to avoid sequestration
Debate influencers Defense industry pushes back against cuts,
exerts political pressure “NDD” organizations rally against cuts
Numerous suggestions from lawmakers Delay impact for a year? Exempt defense spending?
Any alternative likely to include significant cuts to federal spending
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Potential Alternatives and Proposals
Maybe it’s not so bad? OMB Watch releases report in November saying
administration can take actions to lessen the effect in the short term, impact of temporary sequester will not be as severe as projected
lessens urgency to address sequester in lame duck?
A “bridge” over the fiscal cliff? On November 7th, Speaker of the House John
Boehner (R-OH) suggests that Congress delay the impact of “fiscal cliff” items until the start of the next Congress to allow more time for debate Senate Majority Leader Harry Reid (D-NV) also ok with
short-term fix?Brustein & Manasevit, PLLC
Potential Alternatives and Proposals
A cautionary tale: the SGR “Doc Fix” Congress passed automatic 25% cuts for
Medicare provider reimbursements into law Must vote each year to avoid cuts to provider
payments Increased opportunities for last-minute deal
angling, acrimony, politics Give false picture of budget Not a real long-term solution
A “sequester fix” would need a yearly patch to stave off massive cuts – hard for agencies and private business to budget
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Up Next: the Fiscal Cliff
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The Fiscal Cliff
Term for anticipated economic effect when a number of fiscal and budget-related deadlines all happen at once
Contributors: Expiration of Bush-Era tax cuts Expiration of payroll tax holiday Implementation of sequestration Decrease in Medicare physician
reimbursement rate (SGR)
Brustein & Manasevit, PLLC
The Fiscal Cliff
What would it do? Congressional Budget Office
predicts (in November 2012): Nation’s GDP would decrease by
0.5% Economy would contract Unemployment would rise to 9.1% Loss of 2 million jobs
BUT expiration of tax cuts, sequestration would trim $487 billion from federal budget in FY 2013 Compared with $91 billion if
current policies extendedBrustein & Manasevit, PLLC
The Fiscal Cliff
What’s the solution? Extension of current policies and tax cuts
increases federal debt to “unsustainable levels” per CBO Debt to GDP ratio potentially approaching 90% in
2013, which many say is sign of impending Greek-style financial crisis
But would also increase economic growth, decrease unemployment in the short term
Allowing current policies to expire means economic stagnation but better long-term economic health
CBO: “policymakers will need … to adopt policies that require people to pay significantly more in taxes, accept substantially less in government benefits and services, or both”
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What’s left for the Lame Duck session? Decisions on:
Bush-era tax cuts Emergency unemployment
benefits The Farm Bill Emergency agricultural aid Sandy relief FY 2013 spending Sequestration or alternative
spending plan Debt ceiling?
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Education Spending
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Spending Generally
Overall, pressure to cut federal spending in all sectors including education Recession and stimulus put pressure on
federal treasury Need for unemployment and other benefits
puts pressure on those programs Less tax revenue means less money to go
around
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Education Funding Policy Trends
Move to cut education spending (mostly Congressional Republicans)
Belief that spending on K-12 education has not produced meaningful results 2012 GOP Platform: “[s]ince 1965 the federal
government has spent $2 trillion on elementary and secondary education with no substantial improvement in academic achievement or high school graduation rates…[c]learly, if money were the solution, our schools would be problem-free”
Concern that federal spending drives costs up Attempt to scale back size of federal footprint
in education – greater autonomy at State level
Movement to consolidate funding streamsBrustein & Manasevit, PLLC
Why it Matters, Part 2
Potential for huge economic consequences overall
With or without sequestration: Strong likelihood of significant budget cuts,
including education Budget and sequestration become priorities Hotly contested issues mean there’s no
time/energy for anything else As a result: delay in sequestration debate
until after election; delay of ESEA reauthorization and other policy debates until 113th Congress
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Where the Parties Stand
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Republican Priorities
Less federal control (more local responsibility)
Less federal money “Clearly, if money were the solution,
our schools would be problem-free” Promotion of “school choice”
through: Vouchers Charters Parent triggers
Endorses “rigorous academic standards” “rejects the crippling bigotry of low
expectations” But not Common Core
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Republican Priorities
Critical of HQT requirements Support teacher evaluations with
student achievement playing a “significant part”
Critical of teachers’ unions Mitt Romney on September 2012 Chicago
strike: “Teachers unions have too often made plain that their interests conflict with those of our children, and today we are seeing one of the clearest examples yet”
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Democratic Priorities
Education as a means of economic success for individuals and the country as a whole
Importance of keeping teachers and school employees on the job, through additional federal spending if necessary
Defend place of government in education As driver of accountability, source of
funds But quick to note that government is
not the only actorBrustein & Manasevit, PLLC
Democratic Priorities
Promote “flexibility” and “career- and college-ready standards” in party platform Read: Waivers and Common Core
Have supported Common Core and linked assessments
Largely supportive of teachers’ unions in general But also pushing for teacher evaluations
Supportive of some “school choice” elements Charters, parent triggers
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Universal Trends in Education Policy Moving away from AYP/AMOs Greater autonomy on accountability and
standards at State and local levels Consolidation of smaller programs into
larger funding streams Focus on improving lowest-performing
schools through restructuring and re-staffing
Increased focus on charter schools Increasing “parental choice” options
through charters, parent triggers, vouchers, etc.
Teacher/principal evaluations which include student achievement as a factor
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What the Election Means
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The White House
President Obama reelected for a second term
Likely effects: Waivers continue to be the de facto “law
of the land” unless Congress acts to reauthorize ESEA
Existence of waivers mean administration may turn to other topics, including higher education and upcoming Pell shortfall
Secretary Duncan almost certain to stay on for second term
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The Senate
Democrats keep control of the Senate, increase majority by narrow margin
Despite some retirements, committee of jurisdiction for education remain largely the same Exception: Senator Mike Enzi (R-WY),
HELP Committee Ranking Member, will lose that position due to term limits Senator Lamar Alexander (R-TN) is the likely
replacement
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The House of Representatives Republicans maintain control of the House of
Representatives, though Democrats gain a few seats
Rep. John Kline (R-MN) will remain Chairman of Education and Workforce Committee
Some changes to Committee membership: Rep. Judy Biggert (R-IL) defeated Reps. Jason Altmire (D-PA) and Dennis Kucinich (D-OH)
defeated in primary Rep. Mazie Hirono (D-HI) elected to Senate Reps. Dale Kildee (D-MI), Lynn Woolsey (D-CA) retiring
Departing members means loss of experience, staff, institutional knowledge Especially on early education, equity, poverty issuesBrustein & Manasevit,
PLLC
How does the Election Affect Education? No change in political control/dynamic
means that negotiating positions are unchanged. May force compromise, but may also increase
acrimony. Kline has said Committee will continue work
on ESEA More hearings in 112th? More oversight on ESEA waivers, especially
accountability House must take lead: Harkin has said he will
wait to push his bill until House takes action
Brustein & Manasevit, PLLC
Overall Predictions
Continued focus on fiscal issues, including sequestration, draws attention away from any other issues
Likely to have sequester/budget deal – or at least stopgap measure/ “bridge” at last possible minute in 112th Congress
113th Congress will open with continued debate on fiscal issues, with education possibly making an appearance in spring
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Disclaimer
This presentation is intended solely to provide general information and does not constitute legal advice. Attendance at the
presentation or later review of these printed materials does not create an
attorney-client relationship with Brustein & Manasevit, PLLC. You should not take any action based upon any information in this presentation without first consulting legal
counsel familiar with your particular circumstances.
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