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OMB Directs Agencies to Budget for FY2014 at Five Percent Below the President’s Proposed FY2013 Level

Legislative Update
May 19, 2012

On May 18, Office of Management and Budget (OMB) Acting Director Jeffrey Zients issued initial Fiscal Year (FY) 2014 budget guidance which directs agency requests to be five percent below the net discretionary level in the President’s proposed FY2013 budget-which has not been finalized by Congress.

The memo notes the historic bipartisan deficit reduction process mandated by the Budget Control Act of 2011 (BCA), and that the Administration is adhering to the framework within the legislation. The memo also comments on the planned sequester-that is, mandated cuts to both defense and non-defense spending-which will occur on January 2, 2013, since the Joint Select Committee on Deficit reduction failed to provide an alternative plan. The memo states that:

“The President continues to believe that the Congress can and must act to avoid the BCA’s sequester on both defense and on-defense spending, which is being promoted by the failure of the Joint Select Committee on Deficit Reduction to propose legislation reducing the deficit by at least $1.2 trillion, with a balanced package of deficit reduction. Even with this accomplished, the FY2014 budget will need to make hard choices: the BCA discretionary levels continue to sharply constrain discretionary spending. Accordingly, the FY2014 budget will build upon the BCA and the FY2013 budget’s framework. The FY2014 budget must continue to cut lower-priority spending in order to create room for the most effective investments in areas critical to economic growth and job creation, including education, innovation, infrastructure, and research and development.”

Despite guidance to agencies last year to request budgets that reflect cuts of from five to ten percent below the FY2011 level, the President’s FY2013 budget proposed flat funding the National Institutes of Health (NIH). Although on the surface this would not appear to be a cut, it is when biomedical inflation of 2.8 percent is factored in. Congress is currently working on FY2013 appropriations bills, with the Senate scheduled to mark up its Labor, Health and Human Services, and Education (LHHS) spending bill on June 12 and the House to follow later in June.