Rumor has it that Paul Ryan will be introducing a Republican budget to contrast Republican values with Obama values as contained in Obama’s prepared budget proposal. When Ryan’s budget is released, we’ll look at it. However, today, in honor of the first day of spring, we are looking at the budget for the Department of the Interior. It is pages 131 to 140 of the White House document.

The mission of the Department of the Interior is “to protect and manage America’s natural resources and cultural heritage; provide scientific and other information about those resources; and honor its trust responsibilities and special com­mitments to American Indians, Alaska Natives, and Insular areas.” In support of this mission, the budget proposes a 1% increase in funding for 2013 and identifies $2-billion in savings over a 10-year period. The savings come from “reforms to fees, royalties, and other payments related to oil, gas, coal, and other mineral development on Federal lands and waters.”

The first value promoted is protecting the water in the arid west, something that has recently been of interest and in the news locally.  There is an emphasis on reusing water, with recycling and conservation programs given priority over any new construction. The budget proposes merging  the Central Utah Project Completion Act Office (CUPCA) with the Bureau of Reclama­tion.

Another emphasis is on developing renewable energy on federal lands and water, including $86 million to support agency review and permitting of new renewable energy projects.  The goal is to authorize 11,000 mega­watts of new solar, wind, and geothermal electric­ity generation capacity by the end of 2013.

Two new agencies are proposed, with $164 million allocated to the Bureau of Ocean Energy Management (BOEM), and $222 million to the Bureau of Safety and Environmental Enforcement (BSEE). The two new agencies will share responsibility for leasing Gulf of Mexico waters under the  2007- 2012 Outer Continental Shelf Five-Year Oil and Gas Leasing Program and implementation of a proposed  2012-2017 leasing program, making 75 percent of resources on the Outer Continental Shelf (OCS) available for development.

In response to the Deepwater Horizon disaster, the Obama Administration is reforming offshore oil and gas drilling regulations. The new agency, BSEE, is charged with undoing regulatory capture of safety inspectors and to strengthen oversight of oil and gas operations. “ This includes funding to hire new oil and gas inspectors, engineers, scientists, and other staff to oversee industry operations; establish real-time monitoring of key drilling activities; conduct detailed engineering reviews of offshore drilling and production safety systems; improve oil spill research and development activities; and implement more aggressive reviews of company oil spill response plans.”

Traditional Interior functions of protecting landscapes and promoting outdoor recreation are addressed by proposed funding:

$270 mil­lion to conserve public land, including $109 million for Interior and the U.S. Forest Service to “jointly and stra­tegically” conserve critical landscapes. Reauthorization of the Federal Land Transaction Facilitation Act would allow Interior to use the proceeds of the sale of land in order to purchase other, more valuable, open space.

There is funding for wildfire suppression, including programs designed to reduce fuels close to human habitats.

Funds are directed toward cleaning up abandoned mines on federal lands. One change is how the federal government will treat fees collected from coal mines. Instead of going into a fund that allocates clean-up resources to states according to production levels, funds will be allocated according to the most hazardous sites. Similar fees will be collected from hard rock mines in order to clean up those mining sites. There is another proposed merger of agencies in order to centralize hard rock mine over-sight.

There is a $9-million increase in funds available to tribal governments who elect to manage federal programs in Indian Country.  These programs combat crime on tribal lands by increasing funding for tribal courts, detention centers and community policing.  Funds are also allocated for tribal colleges and to protect natural resources in Indian Country.

The Obama Administration recognizes that mineral development on federal lands generated $10 billion in royalties and fees in 2011. “A number of recent studies by the Government Accountability Office and DOI’s Inspector General have found that taxpayers could earn a better return through more rigorous oversight and policy changes, such as charging appropriate fees and reforming how royalties are set.”

Specific proposals:

·         Charging a royalty silver, gold and copper;

•          Terminating payments to coal-producing States and Tribes that no longer need funds to clean up abandoned coal mines;

•          Extending revenue sharing with States to help defray the costs of managing mineral leases;

•          Charging fees to oil companies for processing drilling permits and inspecting operations;

•          Establishing fees for new non-producing oil and gas leases (both onshore and offshore) to encourage more timely production; and

•          Adjusting royalty rates and terminating the royalty-in-kind program.

Homework:

White House Budget

Central Utah Completion Act

Outer Continental Shelf Five-Year Oil and Gas Leasing Program

The previous blogs about this section  covered ways that Obama was proposing to cut the federal budget. What we are looking at today is the holy grail of GOP politics which is based on the assumption that all Democrats are tax and spend liberals. Republicans always look for ways to cut taxes, and these proposals are all about increasing revenue.  Those pesky Democrats are actually looking at both sides of the equation in order to find some balance. It is about everyone paying their fair share.

“The President is committed to reducing the deficit through a balanced approach—one that re­strains spending across the Budget, including in the tax code; asks the wealthiest among us to con­tribute to deficit reduction; and lays the founda­tion for future growth.”

“We cannot address a deficit a decade in the making through spend­ing cuts alone—that is, unless we, as a country, agree to cut every program in the entire budget by more than a quarter, including defense spend­ing, Social Security payments, Medicare benefits, and veterans’ benefits, along with everything else. The Administration believes in a balanced approach that cuts spending responsibly, but also asks the most well-off in society—many of whom, through loopholes and other exemptions, pay less in taxes than most middle-class families—to contribute their fair share toward reducing the deficit and invigorating our economy.”

“The corporate tax system pro­vides special incentives for some industries, like oil and gas producers, yet fails to provide sufficient incentives for companies to invest in America.”

“… the President announced five principles for tax reform: 1) [it] should be simplified and work for all Americans with lower individ­ual and corporate tax rates and fewer tax brackets.” 2) It should be as good a deal for the middle class as it is for wealthy Americans, and there should be no unneeded subsidies for millionaires. 3) It should both decrease the deficit by $1.5 trillion over the next 10 years and remain a progressive tax code. 4) It should increase the incentives to work and invest in the U.S. 5) It should observe the Buffett Rule.

Specific proposals:

Let the Bush Tax Cuts expire for those at the top.” The Administration remains opposed to the extension of these high-income tax cuts past 2012 and supports the return of the estate tax exemp­tion and rates to 2009 levels. This would reduce the deficit by $968 billion over 10 years.”

“… the proposal would limit the tax rate … to a maximum of 28 percent, [for] married taxpayers filing …with income over $250,000 (at 2009 levels) and single taxpayers with income over $200,000. This [limits] all itemized deductions; foreign excluded income; tax-exempt interest; employer sponsored health insurance; retirement contributions… It would reduce the deficit by $584 billion over 10 years.”

“… pro­poses to eliminate the loophole for managers in investment services partnerships and to tax car­ried interest ... This would reduce the deficit by $13 billion over 10 years.”

“… change depreciation schedules for corporate planes … to seven years ... This would reduce the deficit by $2 billion over 10 years.”

“…to phase out subsidies for fossil fuels…reduce the deficit by $41 billion over 10 years.”

“…the President said in his 2011 State of the Union address, we cannot win the future with the government of the past. In order to win the future and better serve a more competitive America, we need a 21st Century government that is efficient, effective and accountable. To continue these efforts, the Administration proposes to:

“…reorganizing government so that it does more for less, and that it is best po­sitioned to assist businesses and entrepreneurs grow and win in the world economy…” The primary vehicle for this reorganization would be a proposed bill--the “Reforming and Consolidating Govern­ment Act of 2012…”

… consoli­date … Department of Commerce, Small Business Administration, Office of the U.S. Trade Representative, Export-Import Bank, Overseas Private Investment Corpora­tion, and the U.S. Trade and Development Agen­cy.” … incorporate related programs from …the Department of Agriculture’s business develop­ment programs, the Department of the Treasury’s Community Development Financial Institutions Fund program, the National Science Foundation’s statistical agency and industry partnership pro­grams, and the Bureau of Labor Statistics from the Department of Labor.

“… [move] the National Oceanic and Atmospheric Administration to the Department of the Interior.”

“With more effectively aligned and deployed trade promo­tion resources, strengthened trade enforcement capacity, streamlined export finance programs, and enhanced focus on investment in the United States, the Government could better implement a strong, pro-growth trade policy.”

“… generate approximately $1.5 billion in savings over the next 10 years by reducing overhead and consolidating offices and support functions, … additional … savings through programmatic cuts … for a total of $3 billion over the next 10 years.”

The President promises to stop making payments where money is not owed. “Agencies … recaptured more than $1.2 bil­lion in overpayments to contractors and vendors in 2011. … the Administration is less than $100 million away from meeting the President’s goal to recapture $2 billion by the end of 2012.”

“President directed agencies to accelerate efforts to shed unneeded property and reduce operating costs in order to achieve $3 bil­lion in non-defense savings by the end of 2012.,, Building off the best practices of BRAC, the Administration proposed the Civilian Proper­ty Realignment Act (CPRA) ... The proposal would create an independent Board of experts to identify opportunities to consoli­date, reduce, and realign the Federal footprint as well as expedite the disposal of properties.”

The president directed the administrative staff to reduce expenses by controlling travel costs and “employee informa­tion technology devices.” (I guess that means laptops and cell phones!)

“DOD is: 1) decreasing the use of high-risk contracts based on time-and-materials and labor-hours; 2) … provide needed oversight; 3) eliminating or re­structuring lower-priority acquisitions; 4) reduc­ing contract spending on management support services; 5) taking full advantage of contract ve­hicles that reflect the Government’s buying lever­age; 6) increasing the use of strategic sourcing; 7) increasing small business participation; and 8) improving financial management systems.”

“… the Budget includes approximately $1 billion for energy conservation investments at DOD… energy retrofits of existing buildings, meet­ing energy efficiency standards in new buildings, and developing renewable energy projects”

” To reduce duplicative spending, the Administration has already shut down over 140 Government data centers and is on track to close nearly 1,100 by the end of 2015. Overall, the data center optimization efforts are expected to yield $3 to $5 billion in savings.”

“OMB will work with the Congress to eliminate or consolidate plans and reports that have become outdated or duplicative.”

“the Adminis­tration is testing a new program model—Pay for Success—in which the Government provides flex­ibility for how services are delivered and pays for results after they are achieved.”

We are now officially up to page 51! More to come.

Homework

2013 White House Budget

The last time we visited Obama’s budget, we were about to look at the proposals in the budget that would provide spending cuts and/or revenue increases in order to cut the deficit. We are picking up where we left off by filling in the blanks of the proposals outlined in the last blog.

Proposals include:

Find Savings in the Agricultural Sector.

“The Administration remains committed to a strong safety net for farmers, one that protects them from revenue losses that re­sult from low yields or price declines, and strong crop insurance programs. But there are programs and places where current support is unnecessary or too generous. To reduce the deficit, the Admin­istration proposes to eliminate or reduce those programs, while strengthening the safety net for those that need it most.”

The proposal would eliminate direct payments to farmers, for a savings of $23-billion over 10 years.

The proposal would reduce crop insurance subsidies: “… the program continues to be highly subsidized and costs the Government ap­proximately $10 billion a year to run: $3 billion per year for the private insurance companies to administer and underwrite the program and $7 billion per year in premium subsidy to the farmers. “ Reducing this subsidy, capping insurance administrative costs, and changing the premiums for catastrophic coverage policies would save $4.3 billion over 10 years.

“In addition, the Administration is proposing to reduce producers’ premium subsidy by 2 basis points for all but catastrophic crop in­surance … expected to save $3.3 billion over 10 years.”

“… the Administration proposes to reduce conservation funding by $1.8 billion over 10 years by better targeting conserva­tion funding to the most cost-effective and environmentally-beneficial programs and practices.“

 

Better Align Federal Worker and Military Retirement Programs.

$12.1 billion can be saved by increasing deductibles, capping benefits, and increasing enrollment fees for retirees.

“To recommend improve­ments to the military retirement system, the Administration is proposing to establish a Military Retirement Modernization Com­mission. Under the proposal, the President would appoint the Commissioners; DOD would transmit to the Commission initial recommendations to change the military re­tirement system; the Commission would hold hearings, make final recommendations, and draft legislation to implement its recommen­dations …“

“The Administration believes that any major military retirement reforms should include grandfathering provisions for cur­rent retirees and those currently serving in the military.“

Reform the Aviation Passenger Security Fee to Reflect the Costs of Aviation Secu­rity More Accurately.

“The Administration proposes to replace the current “per-enplanement” fee structure with a “per one-way trip” fee structure … remove the current statu­tory fee limit and replace it with a … minimum of $5.00 … annual incremental in­creases of 50 cents from 2014 to 2018, … allow the Secretary of Homeland Security to adjust the fee … through regulation when necessary. The proposed fee would collect an estimated $9 billion in additional fee revenue over five years, and $25.5 billion over 10 years. Of this amount, $18 billion will be deposited into the General Fund for debt reduction.”

Share Payments More Equitably for Air Traffic Services.

“To reduce the deficit and more eq­uitably share the cost of air traffic services across the aviation user community, the Administration proposes to create a $100 per flight fee, payable to the Federal Aviation Administration, by aviation operators who fly in controlled airspace.”

There are some exemptions to this fee, including exemptions for military aircraft.

This fee would generate $7.4 billion over 10 years.

Provide Postal Service Financial Relief and Undertake Reform.

“the President is proposing a … reform package that would: 1) re­structure Retiree Health Benefit pre-funding … 2) provide USPS with a refund over two years of the $10.9 billion positive credit balance … 3) … reduce delivery from six days to five days starting in 2013; 4) allow USPS to increase col­laboration with State and local governments; and 5) … better align the costs of postage with the costs of mail delivery … and … increase in postage rates …”

“…would produce savings of $25 billion over 11 years.”

Strengthen the Safety Net for Workers’ Retirement Benefits.

The Pension Benefit Guaranty Corporation “is responsible for paying current and future retirement benefits to more than 1.5 million workers and retirees. PBGC re­ceives no taxpayer financing and relies primarily on premiums paid by insured plans. PBGC pre­miums are currently much lower than what a pri­vate financial institution would charge for insur­ing the same risk and are insufficient for PBGC to meet its long-term obligations. As of the end of September 2011, PBGC faced a $26 billion deficit. The Administration proposes to encourage com­panies to fully fund their pension benefits and ensure PBGC’s continued financial soundness by giving the PBGC Board the authority to ad­just premiums …”

“This proposal … the single-employer flat-rate premium that will raise approximately $4 billion by 2022; …  the single-employer variable-rate pre­mium to raise $12 billion by 2022. This proposal would save $16 billion over the next decade.”

Restore the Solvency and Financial Integ­rity of the Unemployment Insurance System by Helping Employers Now and Restoring State Fiscal Responsibility.

“Currently, 28 States owe more than $37 billion to the Feder­al UI trust fund. As a result, employers … now facing automatic Federal tax in­creases, …States have little prospect of paying these loans back ... State UI programs … improper pay­ment rates—12 percent in fiscal year 2011. The Administration proposes to put the UI system back on the path to solvency and financial integ­rity by providing immediate relief to employers to encourage job creation now, reestablishing State fiscal responsibility going forward, and working closely with States to eliminate improper pay­ments.”

“…employers in indebted States would receive tax relief for two years.”

“the proposal would also raise the minimum level of wages subject to unemployment taxes”

Reform Abandoned Mine Lands (AML) Payments.

“The coal industry … is cur­rently held responsible for cleaning up abandoned coal mines by paying a fee that finances grants to States and Tribes for reclamation”

“… regular reclamation funds are not … targeted at the highest priority abandoned mine lands, … amounts are distributed by a production-based formula …funding goes to the States with the most coal production, not the greatest reclamation needs …”

“…the Administration proposes to terminate unrestricted payments [that] do not contribute to reclaiming abandoned coal mines…”

“Through a competitive grant program, a new AML Advisory Council will review and rank the abandoned mine lands sites, so that the Depart­ment of the Interior, in coordination with States and Tribes, can distribute grants to reclaim the highest priority coal sites each year.”

“The Administration proposes to create a parallel AML program for abandoned hardrock sites. … hardrock reclamation would be financed by a new AML fee on the production of hardrock miner­als on both public and private lands.”

“…this proposal will save $1.6 billion over the next 10 years.”

Provide a Better Return to Taxpayers from Mineral Development.

“The public received about $10 billion in 2011 from fees, royalties, and other payments related to oil, gas, coal, and other mineral development on Federal lands and wa­ters.”

“… taxpayers could earn a better return through more rigorous oversight and policy changes…”

“The Budget proposes …  charging a royalty on … hardrock minerals (such as silver, gold, and copper); ex­tending net receipt sharing … charging user fees to oil companies for processing oil and gas drilling permits and in­specting operations on Federal lands and waters… establishing fees for new non-producing oil and gas leases (both onshore and offshore) …  making administrative changes to Federal oil and gas royalties[i.e.] adjusting royalty rates and terminating the royalty-in-kind program. … these changes are expected to generate approximately $3 billion in savings over 10 years.”

Health Savings

“Health care comprises one-quarter of non-in­terest Federal spending, and is the major driver of future deficit growth.

“Affordable Care Act (ACA) which, ac­cording to the Congressional Budget Office’s lat­est analysis, will reduce the deficit by more than $1 trillion over the next two decades.”

And then there is this warning to the GOP: “Repealing or failing to implement health care reform would return the Nation to a path of rapidly increasing health care costs, and add tril­lions to deficits over the long run. The President is putting forward $364 billion in health savings that build on the ACA to strengthen Medicare, Medicaid, and other health programs by reducing wasteful spending and erroneous payments, and supporting reforms that boost the quality of care.”

“… Medicare …reimburses 70 percent of bad debts resulting from beneficiaries’ non-payment of de­ductibles and copayments …”

“the Budget proposes … reducing bad debt payments to 25 percent … over three years starting in 2013. This proposal will save approximately $36 billion over 10 years.”

“This proposal would reduce the IME adjustment by 10 percent beginning in 2014, and save approximately $10 billion over 10 years.” The IME adjustment evidently reimburses teaching hospitals for inefficiencies caused by interns.

“payment system is better targeted [in rural hospitals] will save approximately $2 billion over 10 years.”

“… the Administration supports policies that will save approximately $63 billion over 10 years … These include adjust­ing payment updates for certain post-acute care providers, equalizing payments for certain condi­tions commonly treated in IRFs and SNFs; en­couraging appropriate use of inpatient rehabili­tation hospitals; and adjusting SNF payments to reduce unnecessary hospital readmissions.”

By allowing Medicare to negotiate price with drug manufacturers “This proposal is estimated to save $156 billion over 10 years.”

“Beginning in 2017, the Administra­tion proposes to increase income-related premi­ums under Medicare Parts B and D by 15 percent”

“… the Administra­tion proposes … a $25 increase in the Part B deductible in 2017, 2019, and 2021 for new ben­eficiaries … save approximately $2 billion over 10 years.”

“This proposal would cre­ate a home health copayment of $100 per home health episode… This proposal will save approximately $350 million over 10 years.”

“… the Administration proposes a Part B premium surcharge equivalent to about 15 percent of the average Medigap premium (or about 30 percent of the Part B premium) for new beneficiaries that purchase Medigap policies with particularly low cost-sharing requirements, starting in 2017. Cur­rent beneficiaries and near-retirees would not be subject to the surcharge. This proposal will save approximately $2.5 billion over 10 years.”

 Fraud prevention is expected to  save nearly $5 billion over the next 10 years.

By changing how states are allowed to tax health care providers, this proposal is projected to save $21.8 billion over 10 years.

By changing how states are reimbursed for Medicare, Medicaid and CHIP programs this proposal is projected to save $17.9 billion over 10 years.

“The Medicare program … through the DME Competitive Bidding Program… is expected to save the Medicare program more than $25 bil­lion and Medicare beneficiaries approximately $17 billion over 10 years.”

“The Admin­istration proposes to increase the availability of generic drugs and biologics by authorizing the Federal Trade Commission to stop companies from entering into anti-competitive deals, known also as “pay for delay” agreements, intended to block consumer access to safe and effective ge­nerics.”

“… greater ac­cess to lower-cost generics and will generate $11 billion over 10 years in savings to Federal health programs including Medicare and Medicaid.”

“Beginning in 2013, this proposal would award brand biologic manufacturers seven years of exclusivity rather than 12 years … prohibit additional periods of ex­clusivity … due to minor changes in product formulations… The proposal will result in $4 billion in savings over 10 years to Federal health programs including Medicare and Medicaid.”

The last section in this part of the budget proposal deals with tax reform. We’ll save that for another day.

FYI, this blog reviewed pages 13 to 37 of the budget document.

 Homework

White House Budget

To hear Republicans talk, the Obama budget does nothing to cut waste or reduce the deficit, so I thought we’d look at the section titled “CUTTING WASTE, REDUCING THE DEFICIT, AND ASKING ALL TO PAY THEIR FAIR SHARE” today.

Not surprising, the opening paragraph is a campaign focused diatribe: “To construct an economy that is built to last and creates good jobs that pay well for genera­tions to come, it will take making investments in education, innovation, and infrastructure so that our entrepreneurs, scientists, and workers have the tools they need to succeed. To pay for those investments and free our economy from the bur­den of historic deficits and growing debt, we need to change how Washington does business, and restore responsibility for what we spend and ac­countability for how we spend it. For too long, Washington has spent money without identify­ing a way to pay for it. Indeed, the cost of the 2001 and 2003 tax cuts as well as the Medicare prescription drug benefit passed in the last ad­ministration contributed significantly to turning the surpluses of the 1990s into the record defi­cits of the following decade. The financial crisis and recession exacerbated our fiscal situation as revenue decreased and automatic Government outlays increased to counter the recession and cushion its impact. The result was that, upon taking office, the President faced an annual defi­cit of $1.3 trillion, or 9.2 percent of GDP, and a 10-year deficit of more than $8 trillion—and this figure grew even larger as the depth of the re­cession became clear. While the need to jump-start our economy through the Recovery Act and other measures added to the short-term deficit, these critical measures were temporary and did not have significant deficit effects beyond the recession.”

The budget document, in a section titled “Making Tough Choices to Restore Fiscal Discipline” lays out several proposals and guiding principles:

Reduce Discretionary Spending:  Obama expresses his intent to work within the guidelines contained within the bill passed in 2012 that defined budget cuts in order to get a cap to the debt limit passed.

Cut or Consolidate Programs: “In each of his first two bud­gets, the President put forward more than 120 terminations, reductions, and savings totaling approximately $20 billion in each year. In 2012, the Budget proposed more than 200 terminations, reductions, and savings, totaling approximately $30 billion in savings. This year, the Administra­tion is proposing cuts and consolidations across the Government in order to live within the caps established by the BCA. To achieve these savings, we went through the Budget carefully to identify programs that were either ineffective, duplica­tive, or outdated and thus needed to be cut or consolidated”

Implement the New Defense Strategy: “The overall defense budget, including overseas contingency operations reductions, will be down by 5 percent from the 2012 enacted level.”

Establish a Budget Cap on Overseas Con­tingency Operations (OCO) Spending: “…the BCA did not limit OCO funding. Leaving OCO funding un­constrained could allow future Administrations and Congresses to use it as a convenient vehicle to evade the fiscal discipline that the BCA caps require elsewhere in the Budget. …From 2013 through 2021, the Budget limits OCO appropriations to $450 billion.”

Require the Financial Services Industry to Pay Back Taxpayers: The Administration is calling for a Financial Crisis Responsibility Fee on the largest financial institutions to fully com­pensate taxpayers for the extraordinary support they provided to the financial sector, while dis­couraging excessive risk-taking. …The fee will be restricted to financial firms with assets over $50 billion. The Administration’s Financial Crisis Responsibility Fee meets the statutory requirement contained in the TARP legislation that requires the President to propose a way for the financial sector to pay back taxpayers so that not one penny of the Government’s TARP-related debt is passed on to the next generation. …This fee will reduce the deficit by $61 billion over the first 10 years.”

Restrain Increases in Federal Civilian Worker Pay: On his first day in office, the President froze salaries for all senior political appointees at the White House. In 2010, the President eliminated bonuses for all po­litical appointees across the Administration and last year cut back on performance awards to all other employees. Starting in 2011, the President has proposed and the Congress enacted a two-year pay freeze for all civilian Federal workers, which has saved approximately $3 billion and is projected to save more than $60 billion over the next 10 years.”

Reform Federal Civilian Worker Retire­ment: “In order to make reasonable changes to Federal worker retirement, while maintaining the ability to attract and retain highly qualified individuals, the Administration proposes to in­crease the employee contribution toward accru­ing retirement costs by 1.2 percent over three years beginning in 2013.”

Modernize Federal Personnel Policies: “the Administration recommends that the Congress establish a Commission on Federal Public Ser­vice Reform comprised of Members of Congress, representatives from the President’s Labor-Man­agement Council, members of the private sector, and academic experts. The Commission would de­velop recommendations on reforms to modernize Federal personnel policies and practices within fiscal constraints. Such reforms could include but would not be limited to compensation, staff devel­opment and mobility, and personnel performance and motivation.”

We’ll review the balance of this section in our next budget blog.  As a preview of coming attractions, the next section in the document is titled “Taking Responsibility for Long-TermChallenges to Our Fiscal Health” “…the President put forward hundreds of billions of dollars in savings over 10 years in mandatory programs as well as guidelines to generate $1.5 trillion in revenue from tax reform. … the President’s Budget includes $517 billion in mandatory savings over the next 10 years and a plan for tax reform to raise more than $1.5 trillion.” Proposals include:

Find Savings in the Agricultural Sector.

Better Align Federal Worker and Military Retirement Programs.

Reform the Aviation Passenger Security Fee to Reflect the Costs of Aviation Secu­rity More Accurately.

Share Payments More Equitably for Air Traffic Services.

Provide Postal Service Financial Relief and Undertake Reform.

Strengthen the Safety Net for Workers’ Retirement Benefits.

Restore the Solvency and Financial Integ­rity of the Unemployment Insurance System by Helping Employers Now and Restoring State Fiscal Responsibility.

Reform Abandoned Mine Lands (AML) Payments.

Provide a Better Return to Taxpayers from Mineral Development.

 Homework:

White House Budget

I’ve spent a few days ranting and raving about the war on women and local political candidates, but I promised a look at the budget presented to congress by President Obama. I promised a summary, with opinion, of each section. The President may be proposing another budget before we get this project done at the rate we are going!

By the way, we are not taking this in the order that it was presented. I can’t help myself, some things interest me more than others, so today we are looking at Department of Energy, which runs from page 105 to 109.

For controversial starters, this is one section of the budget that is proposed at a higher level than was the 2012 budget, up 3.2% to $27.2 billion. “In light of the tight discre­tionary spending caps, this increase in funding is significant and a testament to the importance of innovation and clean energy to the country’s eco­nomic future.” The argument is that if we don’t invest in the energy of the future, we won’t have much of a future. The oil and gas industry will be howling about the focus of this budget because it eliminates $4-billion in “inefficient and outdated” fossil fuel subsidies, but provides subsidies for clean energy and “advanced manufacturing.” 

Now let’s get into the weeds…

Obama’s narrative begins with a mission statement for the Department of Energy: “The Department of Energy (DOE) is charged with advancing the national, economic, and energy security of the United States; promoting scientific and technological innovation in support of that mission; maintaining the Nation’s nuclear weapons and reducing nuclear dangers; and en­suring the environmental cleanup of the national nuclear weapons complex.”

$2.3-billion is directed to the Office of Energy Efficiency and Renewable Energy (EERE). “Within EERE, the Budget increases funding by nearly 80 percent for energy efficiency activities to improve the energy productivity and competitiveness of our industries and businesses. “

 $310 million is directed to the SunShot Initiative, with a goal of making solar energy cost-competitive without subsidies by the end of the decade.

 $95 million for wind energy, including off-shore wind technologies.

 $65 million for geothermal energy and enhanced geo­thermal systems.

$350 million for the Advanced Research Projects Agency–Energy, a program that funding “transformative” energy research.

“Fossil energy” still gets $421 million, which includes $12 million to improve technologies in developing natural gas. “Specifically, DOE, in collaboration with the Environmental Protection Agency and the U.S. Geological Survey, will focus on understanding and reducing the environmental, health, and safety risks of natural gas and oil production from hydraulic fracturing in shale and other geologic formations.”

$290 mil­lion for R&D on innovative manufacturing processes and “advanced industrial materials.” “The Budget also continues to support the development of competitive new manufacturing processes for advanced vehicles, biofuels, solar energy, and other new clean energy technology, to help ensure that the technologies invented here are manufactured here.”

$5-billion to the Office of Science for long range R & D to keep America competitive. This funding supports research to understand the molecular structure of materi­als and the processes of chemical reactions.

The budget document then goes into how it will cut some spending to pay for the new spending. It did my heart good to read, “As we continue to pursue clean energy technologies that will support future economic growth, we should not devote scarce resources to subsidizing the use of fossil fuels produced by some of the largest, most profitable companies in the world. That is why the Budget eliminates in­efficient fossil fuel subsidies that impede invest­ment in clean energy sources and undermine ef­forts to address the threat of climate change.”

And for the consumer: “The Admin­istration continues to call on the Congress to pass the HomeStar bill, or other mandatory funding legislation aimed at creating jobs by encouraging Americans to invest in energy saving home im­provements.”

For the small business, “Through the Federal Energy Management Program, DOE will help other Federal agencies improve the energy efficiency of all Federal build­ings (representing over 3 billion square feet) with agencies’ total investment to exceed $2 billion through performance-based contracts over the next two years, all at no net cost to the taxpayer. This is achieved through contracts that provide enough savings in energy to more than pay for the investments.”

For national security:

“The Administration pro­poses $7.6 billion for Weapons Activities, an in­crease of $363 million or 5 percent above the 2012 enacted level, to maintain a safe, secure, and ef­fective nuclear deterrent as described in the Ad­ministration’s Nuclear Posture Review (NPR) of 2010.”

“$1.1 billion, a $9 million increase above the 2012 enacted level, to support work on naval reactors, including continued operational support of nuclear-powered submarines and aircraft carriers, and reactor development for a replacement to the OHIO class ballistic missile submarine.”

“The Budget includes $5.65 billion to ensure our Nation’s legacy of nuclear wastes from the production of weapons during the Cold War are processed, secured, and safely disposed of in a timely manner. …The program’s cleanup actions include removing radioactive wastes from underground storage tanks, decontaminating and decommissioning old production facilities, and in­stalling groundwater monitoring wells primarily at sites in Washington, South Carolina, Idaho, Tennessee, Kentucky, Ohio, and New Mexico.”

“The Budget includes $2.5 billion, a $163 million or 7 percent increase above the 2012 enacted level, which reflects completion of accelerated efforts to secure vulnerable nucle­ar materials within four years,”

Anyone actually reading this section of the budget will have no doubt that this president is looking toward a future that is cleaner and safer for all Americans. I’d like to see less money going into nuclear weapons, but understand that it is necessary as a deterrent.  I’m hoping that the focus on small reactors might result in a small reactor design that would eliminate the kinds of threats posed by large reactor melt-downs. I applaud the president for taking on the oil and gas industry’s fossil fuel tax loopholes, but worry a bit about continued investment in fracking—although there has been industry interest in developing and promoting green frack fluids.

Yesterday I opined that the President’s Budget was being bashed by people who had not read it. Given that the comments came within an hour of the document being delivered to congress, I did not believe that any of the Republican leadership had actually read the document. I still believe that. It is linked below, and is 256 pages long. Let’s just say it takes a minute to read and understand one page—that is 256 minutes, or 4.26 hours.

I haven’t read the entire document yet, either. But, I will. Just as I read the entire jobs bill, and reported my thoughts here, I’ll be reading the entire budget and sharing, both here and in my Grand Junction Free Press column, my opinion.

For starters, there are 30 sections to the budget. It starts with an executive summary, moves to a section for each governmental agency, and then ends with tables and a list of people who worked on the budget. My guess is that all of the comments from Canter and Boehner were based on reading the executive summary and taking a quick look at the tables.

That is also how we will begin.

Executive Summary:

Clearly this is an election year budget, and we see the theme of Obama’s campaign for reelection laid out in the opening words:  “America was built on the idea that anyone who is willing to work hard and play by the rules, can make it if they try—no matter where they started out. By giving every American a fair shot, asking everyone to do their fair share, and ensuring that everyone played by the same rules, we built the great American middle class and made our country a model for the world.”

The document then summarizes the environment that has the middle class doubting the American Dream.  Despite having good universities, productive workers, and innovative companies, the middle class has seen their share of the economy shrink, and then fall off a cliff in 2008. Contributors to the crash were stagnant wages, financial villains structuring bad financial products, and a desperate middle class using their home equity as an ATM.  It should come as no surprise that legislators who are defending the top 1% and fighting any regulation of the financial institutions (who make money without producing anything other than foreclosures and bankruptcies for middle class families) might want to paint a different picture.

The document says saving the middle class and the American Dream is “the defining issue of our time.”

“The way to rebuild our economy and strengthen the middle class is to make sure that everyone in America gets a fair shot at success. Instead of lowering our standards and our sights, we need to win a race to the top for good jobs that pay well and offer security for the middle class. To succeed and thrive in the global, high-tech economy, we need America to be a place with the highest-skilled, highest-educated workers; the most advanced transportation and communication networks; and the strongest commitment to research and technology in the world. This Budget makes investments that can help America win this race, create good jobs, and lead in the world economy.”

After making that broad policy statement, the document sticks Obama’s finger into the collective eye of the previous administration and the current Republican legislators. “When I took office 3 years ago, my Administration was left an annual deficit of $1.3 trillion, or 9.2 percent of GDP, and a projected 10-year deficit of more than $8 trillion. These deficits were the result of a previous 8 years of undertaking initiatives, but not paying for them—especially two large tax cuts and a new Medicare prescription drug benefit—as well as the financial crisis and recession …”

And then he pokes his finger into the other eye: “we enacted the Affordable Care Act, which will not only provide Americans with more affordable choices and freedom from insurance company abuses, but will also reduce our budget deficits by more than $1 trillion over the next two decades.” With every Republican candidate for president promising a repeal of the Affordable Care Act, it is inconvenient to be reminded that the bill, as analyzed by an independent arm of government, actually reduces deficits.

Adding insult to injury, Obama describes how he put $4-trillion in deficit reductions on the table during negotiations to extend the debt ceiling, and printed a road map to paying for the American Jobs Act, which is described as “a set of bipartisan, commonsense proposals designed to put more people back to work, put more money in the pockets of the middle class, and do so without adding a dime to the deficit.” If my reader will recall, I criticized Obama’s roadmap at the time it was printed because it detailed a huge detour to the Super Committee, which eventually failed to come up with any proposals. Their failure triggered automatic cuts in spending, but didn’t pay for any American Jobs Act.

Obama opines that he has designed a budget that will save the American Dream by:

·         Cutting the deficit by $4-trillion over the next decade.

·         Implementing the discretionary spending caps contained in the Budget Control Act of 2011.

·         Implementing a new “defense strategy that reconfigures our force to meet the challenges of the coming decade.” (This is probably the point where the Republican leaders stopped reading.  It comes at page 7, which only took 7 minutes to read, using our estimate of one page per minute.) This new defense strategy eliminates things like “the C-27 airlift aircraft and a new weather satellite.” His plan is to cut $487 billion from defense budgets over the next decade.

·         Allowing the Bush tax cuts to expire, eliminating “special tax breaks for oil and gas companies,” eliminating tax breaks for corporate jets, and implementing the “Buffett Rule.”

·         Fighting the Ryan Plan and reforming health programs to save over $360-billion over 10 years.

·         Implementing “mandatory savings” to save $217-billion over 10 years. “These include reductions in agricultural subsidies, changes in Federal employee retirement and health benefits, reforms to the unemployment insurance system and the Postal Service, and new efforts to provide a better return to taxpayers from mineral development.”

·         Promoting the American Jobs Act.

·         Supporting Pell Grants and education tax credits.

·         Creating 100,000 math and science teachers.

·         Supporting Race to the Top education grants.

·         Turning our unemployment system into a “re-employment” system.

·         Supporting non-defense research and development at the National Institute of Health, the Food and Drug Administration.

·         Investing in environmental research.  “By conserving iconic American landscapes, restoring significant ecosystems from the Everglades to the Great Lakes, and achieving measurable improvements in water and air quality, we are working with communities to protect the natural resources that serve as the engines of their local economies.”

·         Investing in clean energy. “These investments will help us achieve our goal of doubling the share of electricity from clean energy sources by 2035.”

·         Supporting small businesses.

Homework

Previous comments are based on the first 11 pages of the 256 page document. Summarizing this document may take 30 days (one day for each section), so there will be times when other events interrupt this program.

2013 White House Budget

My post today has nothing to do with hearts or candy or flowers, but I thought I'd let you know that I do know what day it is.

My post also will not be about Obama's Budget, although it took Eric Cantor one hour to start telling lies about it. The Republican leadership in both houses were bashing it within hours of delivery. It is sad that politics have reached such a state. I'm sure that neither Cantor nor McConnell have read the budget. They probably never will. Maybe their staff will, but even that's doubtful.

I am a Democrat, and I'm not about to defend or bash Obama's budget until I actually read it.
That is going to take a while--it is a BOOK!

So that's all I have to say today. I'll read it. I'll comment about it, but not today.

With Colorado’s legislative session about to begin, this blog will be spending more time on statewide issues. Toward that end today we’ll analyze the latest economic forecast presented to legislators and the governor.

The report starts with the good news that our economy is recovering, although slowly. Constraints continue to be weak housing and financial markets, slow growth in wages, higher prices for commodities, and a lack of consumer confidence, although consumer confidence wasn’t the exact term used in the report.  The report identifies the greatest threat to Colorado’s recovery as the European debt crisis.

For those who complain that government always spends more, the report points out that the legislature will have $470.4 million more to spend in fiscal 2012 – 2013, than it had in 2011-2012. The General fund is the only fund that the legislature has any control over. Here’s what the trends look like in that fund (dollars are in millions—columns will not add up because I did not include Other Income, diversions to restricted accounts or other adjustments):

Category                                     2010-2011            2011-2012            2012-2013            2013 -2014

Excise Taxes                                    $2,323.1                $2,328.5                $2352.8                $2433.4

Individual Income Taxes            $4,496.1               $4,716.3                $4,925.8               $5,258.1

Corporate Income Taxes                $393.1                    $404.7                    $417.1                  $440.1

Gross General Fund Revenue    $7,085.8                $7,315.0                $7,595.8                $8,069.6

Coming as no surprise to those of us who live here, the outlook for the economy in the western part of the state is the weakest in Colorado.  Grand Junction is pointed to as a bright spot because the unemployment rate is falling here, thanks to seeing 2,000 new jobs added by October 31. Construction is still sluggish, with double digit percentage declines in construction permits. There is little growth in the oil and gas industry in western Colorado, although Colorado is seeing significant growth in that industry, as measured by active drilling rigs in the state.

For those looking forward to TABOR enforced rebates of income taxes, none are in the foreseeable future.

Hickenlooper’s budget, which spends the general fund revenue, not otherwise allocated to mandated programs, was released in November. When this report came out, Hickenlooper said that he would move more money into education than previously recommended.

Mandated spending is the one area that many conservatives ignore. More money has to go into Colorado’s Medicaid program because more people are becoming eligible and enrolling. Some of the increases in eligibility are a function of continued high unemployment, with people who lost jobs applying to Medicaid. To pay for mandated increases in Medicaid, the governor’s budget calls for continued delays in reinstating the senior Homestead property tax exemption.

In a legislature that is already spoiling for a fight because of the “vindictive Democratic maps” the battle lines have already been drawn. The Republicans are going to fight for reinstating the senior tax exemption, and the Democrats are going to question Hickenlooper’s diversion of funds to economic development programs, at the expense of education.

Homework

Link to Government's Forecast dated December 2011

Denver Business Journal's Reporting on Hickenlooper Budget

_ Governor Hickenlooper recently released his budget for fiscal year 2013.  The headline in the Denver Business Journal was “Hickenlooper's budget plan calls for more funds for eco-devo, less for education.”  As a former economic development professional, I was amused at “eco-devo.” It was the first time I ever saw that abbreviation! Cuts to education are less amusing, but were predictable.

The Hick is actually talking jobs with his focus on economic development. Reducing regulation doesn’t create jobs. Cutting taxes absent a requirement to create jobs doesn’t do the job. But economic developers have always been focused on creating jobs. They even track how many jobs are created and retained as the result of their activities by asking their clients to report how money was used, and how many jobs were impacted.

The fights over the budget will likely be extreme. Most members of my party are going to be aghast at the thought of handing out “corporate welfare” checks while cutting education funding by $160 per child. In my opinion, it is the right thing to do in this environment. The economy is still struggling, and people are still losing their homes to foreclosure. We need to focus on creating jobs, and getting people back to work.  If we get Colorado back to work, tax revenues will increase, and we’ll be able to stop the cycle of cuts to education. At least, that’s Hickenlooper’s plan.

So, here’s the plan (Warning policy wonkishness ahead):

The budget for economic development increases by 60% over current budgets. Government is going to do its part to create jobs. In order to implement the economic development plan, the office of economic development is going to hire 12 – 15 new workers to recruit companies and to work with local economic groups on implementing the strategies.

$6-million is directed toward companies that create at least 20 jobs that pay more than 110% of the average wage in the county in which they are located. The reward for giving 20 people jobs that are higher paying than the average existing jobs is the company gets to keep half of the federal Social Security and Medicare taxes they would otherwise be required to pay on those jobs. Now, I know that the federal government is not going to forgive those taxes because it messes up their actuarial tables.  The state will have to fill that gap and make the federal payments on behalf of the companies.

In Mesa County, the average weekly wage, as measured on 12/31/2010, was $800 - $899. The national average weekly wage for the same period was $971. Under this plan, companies in Mesa County creating at least 20 new jobs would be creating them at $880 - $989. At the high end, Mesa County workers would be getting 102% of the national average, not 110% of the national average. That’s because wages in Mesa County are already relatively low.

The budget for K-12 is decreased by $89-million. Those cuts that School District 51 tried to warn voters about are now on their door step. They are going to be hit by a double whammy-- Lower levels of funding from the state, and lower levels of funding from property taxes. (Property taxes will decrease because property values have decreased.) Parents of kids in K-12 are not going to be happy with the cuts in their local schools, and may very well wish they had voted differently on 3B.

The budget for higher education is decreased by $60-million, absent rounding--the exact same amount as is going into economic development.  Half of the $60-million will come from decreases in direct payments to universities and colleges, with the other half coming from decreases in financial aid. This is the truly sad trade-off. Tuition will increase because less money is going into higher education, but kids won’t find a corresponding increase in financial aid. That means they will have to take out more loans or drop out of school until they can earn enough money to pay for the increased tuition. Lots of drop outs never return, thus the outlook for the future just got dimmer.

The drivers for required budget cuts are federal programs that can’t be cut. People, who have lost jobs, are signing up for Medicaid. Medicaid requires the state to match federal funding. The state has 281,000 new people on Medicaid. The Affordable Care Act does not allow states to reduce eligibility standards if they want to continue to receive Medicaid funding. Colorado is trying to control the costs of these programs by increasing co-pays, enrollment fees, and insurance premiums. There are also incentives for Medicaid recipients to use primary care physicians instead of the emergency room—something Mesa County has already tried to do with its wonderful Marillac Clinic.

Finally, the governor’s budget asks for $3.1-million to allow it to develop a comprehensive energy policy. My opinion is that the governor needs to spend all of that money getting people to move away from fossil fuels, and toward renewable energy sources. Homework

Denver Business Journal Story About Budget

Comparison of wages at the end of 2010

Hickenlooper's Letter to the Legislature