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Future reductions in levels of Federal funding in 2013 and in later years are likely to impact many grant seekers’ funding priorities, plans, and strategies for winning government grants.

 

The Congressional Research Service, which provides technical analysis and support to members of the United States Congress, describes the impacts of the Budget Control Act of 2011 (BCA or the Act) in its eponymously titled report (2011).

 

This post explores the Act’s impacts on the future of Federal domestic discretionary spending, which is that part of the Federal budget that funds many competitively awarded Federal grant programs. Later posts will explore other related trends and legislation and their consequences for grant seekers.

 

Discretionary Spending Trends:

The Budget Control Act of 2011 (BCA) sets in statute specific discretionary spending caps on new budget authority between fiscal year (FY) 2012 and FY2021. Under the Act’s caps, discretionary spending is projected to decline from 9.0% of gross domestic product (GDP) in FY2011 to 6.2% of GDP in FY2021. Since the first year for which such data are available, FY1962, discretionary spending has only been that low in one other year, which was FY1999.

 

In contrast to past trends and future projections, between FY2000 and FY2009, discretionary spending rose by 8.0% per year, on average, and rose by 8.9% in FY2010. The increases since FY2000 were attributable primarily to a rise in defense spending throughout the 2000s, and an increase in spending as a result of domestic economic stimulus programs since 2009.

 

Impacts of Caps on Discretionary Spending:

Growth in nominal spending levels may understate the effects of BCA discretionary spending caps. One reason is that the population of the United States is projected to rise to 322,742,000 by the year 2020. Consequently, the BCA caps will lead to lower discretionary spending per capita than nominal growth rates would indicate for such functional categories as education, training, housing assistance, and health.

 

Decisions on discretionary spending levels are made annually through the Federal appropriations process and it is impossible to know what spending levels the Congress will enact from one future year to the next. Consequently, it remains unknown how the discretionary spending caps will impact any specific program.

 

Discretionary spending under the Act’s caps is projected to decline from 9% of GDP in FY2011 to 6.2% of GDP in FY2021. This decline would reverse the growth in discretionary spending during the 2000s, returning it to the historically low levels of the late 1990s. The BCA makes relatively small cuts to Federal outlays in FY2012; however, discretionary spending cuts will rise every fiscal year thereafter so that the reduction in outlays would be nearly five times larger in nominal terms in FY2021, relative to FY2012.

 

Under the Act, in FY2013, an automatic spending reduction will occur through an across-the-board sequestering of previously authorized budgetary resources. After FY2013, the automatic Federal spending reduction will occur through a sequestering for mandatory spending and through reductions in the overall discretionary caps — rather than by automatic spending cuts — for discretionary spending. The table below summarizes the future reductions in spending.

 

Automatic Spending Reductions in Federal Non-Defense Discretionary Spending:FY2013-FY2021
Fiscal Year 2013 2014 2015 2016 2017 2018 2019 2020 2021
Amount $39B $38B $37B $36B $36B $36B $34B $33B $33B
Percentage 7.8% 7.4% 7.1% 6.8% 6.6% 6.4% 6.1% 5.8% 5.5%

 

Perhaps of particular interest to seekers of Federal grants — any cuts to Federal discretionary programs as a result of the Act’s automatic spending reduction process will occur in addition to the cuts resulting from its discretionary caps.

 

Related Articles:

Efficient Gov.Com — Sequestration: Local Governments Brace for Cuts, Broader Implications

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