Beltway Roundup

Still Waiting on Final Numbers

by Jeff Genzer

Since we last wrote, Congress and President Obama agreed to some revenue increases on the wealthiest Americans, continued the Bush-era tax cuts for more than 98% of Americans, and avoided the first “fiscal cliff” at the start of the New Year. Congress and the president have also agreed to avoid the debt ceiling fight until May 19, tying congressional pay to action by each chamber of Congress on a FY2014 budget. (Actually, Congress will get their pay by the end of the session in any case.) The so-called No Budget, No Pay Act (H.R. 325) passed the House on January 23. In addition, Congress approved most of the so-called tax extenders through the end of 2013. These extenders included a wide variety of energy tax provisions, such as the Production Tax Credit, that mostly impacted wind development. Other provisions that were extended included energy-efficient homes, alternative-fuel-vehicle refueling property, energy-efficient new homes, energy-efficient appliances, a tax credit for electric and plug-in hybrid vehicles, advanced biofuels and other ethanol provisions, mass transit benefits, coal produced on Native American lands, and a special rule for disposition of electric utility property.

What has not been settled? The automatic sequester is due to take effect on March 1, which would cut approximately $85 billion from FY2013 spending levels, evenly split between defense and domestic accounts. Although this is slightly less than the $109 billion sequester in the initial law from the summer of 2011, the impact would be greater because the 2013 fiscal year is almost half over. This would mean cuts of something less than 8% in domestic programs, such as the Weatherization Assistance Program and the State Energy Program. Though many commentators believe that the sequester will not happen, especially because of the dramatic impacts on Department of Defense spending, no substitute cuts have yet been identified. In addition, federal appropriations run out on March 27, which means that Congress must pass another Continuing Resolution or an Omnibus Appropriations bill for the remainder of the fiscal year. House Republicans are attempting to cut at least $73 billion from the $1.047 trillion funding level for FY2013 set in the 2011 law, which is even below the $1.028 trillion level set in the FY2013 Ryan Budget passed by the House. This is the initial suggestion for the House Budget Resolution. Senator Patty Murray (D-WA), the new head of the Senate Budget Committee, has indicated that she intends to move the Senate version of the budget. What is clear is that the House will not propose an increase in revenue in their first budget this spring, and Senator Murray will propose to increase revenue and probably call for some spending cuts.

This means that we do not know what the final numbers will be for Weatherization and State Energy in FY2013. The House had provided $54 million for Weatherization, whereas the Senate provided $145 million (it was $174 million in FY2011 and $68 million in FY2012). For the State Energy Program, $25 million came from the House and $50 million from the Senate level, equal to the spending level in the last two fiscal years. Frankly, it is difficult to see how Weatherization survives as a nationwide program at a $68 million funding level. For the Low Income Home Energy Assistance Program (LIHEAP), the FY2013 funding level is $3.47 billion. In the case of LIHEAP, 90% of the funds were released to the states on November 8, 2012, while the “program year” for Weatherization does not begin until April 1 (at the earliest) and June 1 for the State Energy Program. The impact of the sequester would be severe.

In other news, the president elevated discussion of climate during his inaugural address. He is expected to discuss it again in his State of the Union Address in February. Although much of the action is expected to be in the regulatory sphere, there are some discussions of new initiatives from the administration (and possibly Congress) to pass a revised version of the Shaheen (D-NH)-Portman (R-OH) energy bill (S. 1000 in the last Congress). This could involve some energy financing proposals. Other legislation that could be considered includes addressing threats to cyber security and hydroelectric permitting legislation. The hydroelectric bill already passed the House Energy and Commerce Committee on a unanimous bipartisan vote on January 22 (H.R. 267, by Representatives Cathy McMorris Rodgers [R-WA] and Diana DeGette [D-CO]). Senators Jay Rockefeller (D-WV) and Tom Carper (D-DE) introduced their version of a cyber security bill on
January 22 (S. 21). Senator Barbara Boxer (D-CA), Chair of the Senate Committee on Environment and Public Works, introduced S. 52 to address energy efficiency in federal buildings. The House and Senate have different visions on high-level nuclear waste legislation, but they both appear to be interested in acting. The new Chair of the Senate Committee on Energy and Natural Resources, Ron Wyden (D-OR), has already indicated that he is working with Ranking Member Lisa Murkowski (R-AK) on a variety of items, including offshore oil and gas revenue sharing. The House is expected to continue to focus on limiting the authority of the Environmental Protection Agency, limiting the Renewable Fuels Standard, and limiting the Endangered Species Act—all items expected to go nowhere in the Senate.

There is also continued discussion of doing some type of comprehensive tax reform, though again the House and Senate appear to have very different visions. The House Ways and Means Committee, led by Dave Camp (R-MI), is expected to move forward on tax reform, which would lower rates (including corporate tax rates) and close loopholes, but not increase revenue. The Senate Democrats, led by Max Baucus (D-MT), are inclined to implement tax reform but also want to increase revenue. How this standoff will be resolved, in light of all the other standoffs, is unclear.