THE ELECTION Julia Martin, Esq. [email protected] Brustein & Manasevit, PLLC Fall Forum 2012 Key Players, Status of Education Funding, and Sequestration

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

Brustein & Manasevit, PLLC

Effect of Fiscal Issues on Education


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


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



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


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


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”


Sequestration


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


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


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


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.”


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


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


Up Next: the Fiscal Cliff


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)


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”


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?


Education Spending


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


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


Where the Parties Stand


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


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”


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


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


What the Election Means


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


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


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


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


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.


Documents

THE ELECTION Julia Martin, Esq. [email protected] Brustein & Manasevit, PLLC Fall Forum 2012 Key Players, Status of Education Funding, and Sequestration