News Flash

Budgeting

Posted on: June 2, 2023

Congress Passes Fiscal Responsibility Act

On Wednesday night the House passed H.R. 3746, the Fiscal Responsibility Act of 2023 by a margin of 314-117 and on Thursday the Senate passed the legislation by a vote of 63-36 after a series of amendments were not agreed to. President is expected to immediately sign the bill to avoid a default by the federal government. U.S. Treasury estimates it will run out of money on June 5. Special thanks to the League’s Federal Partner, the National League of Cities (NLC), for sharing much of this information. 

 Highlights of the bill include: 

  • The Treasury’s State and Local Fiscal Recovery funds help desk might be impacted by the debt ceiling bill. We are waiting for further details from the Treasury on this. According to the head of the State and Local Fiscal Recovery Funds program, there won't be "any updates until at least after the bill is passed" on the stat   help desk status. NLC is already working with the Senate Finance Committee to ensure if anything happens to it through rescission, money will be appropriated to it through the appropriations process. 
  • This bill creates a suspension of the debt ceiling until January 1, 2025. This will take this fiscal football out of the hands of Congressional lawmakers until the 2024 post-election lame-duck session. 
  • The bill cuts discretionary spending over 10 years by $1.3 trillion, if the cuts are extended out to 10 years, according to the Congressional Budget Office (CBO). Interest payments on the debt would be reduced by $188 billion over that period, for a discretionary savings of $1.5 trillion, according to the CBO.
  • The bill puts in place fiscal year 2023 spending levels for fiscal year 2024 for non-defense spending. This means cities will not see a year over year increase in federal government spending, but at the same time, the $130 billion in appropriations cuts for non-defense spending proposed by the House Republicans in their opening offer did not materialize. In fiscal year 2025, the bill will increase spending levels by 1% for non-defense spending.  

Rescissions  

The bill includes 81 rescission provisions rescinding funds from six COVID-era bills passed between 2020-2022. This includes the American Rescue Plan Act (ARP). However, the State and Local Fiscal Recovery Funds from ARPARE NOT RESCINDED. The funds that were distributed from Treasury to municipalities remain the municipalities’ funds, whether or not the money has been obligated yet by the municipality. For the purposes of this bill, an obligation was created between the federal government and municipalities with the distribution and cannot be undone. 

Below are some of the areas where municipalities will see rescissions.  

Housing and Urban Development 

Funding enacted in response to the COVID-19 emergency at the Department of Housing and Urban Development (HUD) will be subject to a small number of recissions that, according to the Administration, will have negligible impact on program participants. HUD rescissions include emergency funding for project-based rental assistance, Section 202 Housing for the Elderly, Section 811 Housing for Persons with Disabilities, tribal housing, fair housing activities, and assistance to rural homeowners. Direct grants to local governments, including Emergency Rental Assistance program funds and emergency Community Development Block Grant (CDBG) funds, are not among programs identified by the White House as subject to rescission, and so appear to be protected from cuts related to the debt ceiling. Tenant-based rental assistance (housing vouchers) enacted in response to COVID-19 are also protected from rescission.  

Transportation 

There is a $1.6 billion rescission to the US Department of Transportation Federal Highway Fund. New Jersey will likely lose $81 million from the recission of this fund.

Work Requirements 

The bill includes expanded work requirements for the Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps. Currently, adults ages 18-49 are limited to three months of SNAP benefits every three years unless they are working or in a work or training program at least 20 hours a week. Some individuals are exempt from this requirement, such as those who live with children in the household, those determined to be physically or mentally unfit for work, pregnant people, and others determined to be exempt from the three-month time limit. During the Public Health Emergency, (PHE), which ended on May 11, the three-month time limit was suspended. The additional work requirements included in the bill for SNAP will phase in higher age limits for those work requirements, bringing the maximum age to 54 by 2025. The expanded work requirements have a sunset date of 2030. The new requirements also exempt those who are veterans, homeless, or under 24 and aging out of the foster care system.  

The bill also includes expanded work requirements for the Temporary Assistance for Needy Families (TANF) program in most states. TANF provides cash assistance to families with children and is designed and implemented at the state level. Currently, states are required to ensure that 50% of TANF recipients are working, but states have the flexibility to reduce that threshold based on their caseload reduction as compared to 2005 levels. The bill passed by the House updates the comparison to 2015 levels, which means that more states will have to increase their work requirements to meet this threshold. States can also lower their work participation rates by increasing their state contribution to the program. New Jersey will maintain a “State Only” WorkFirst NJ (WFNJ) Program for two-parent households who do not meet program work requirements. Determination of non-financial and financial eligibility will remain consistent with Federal TANF and WFNJ criteria. Benefits provided to families under this portion of the WFNJ two-parent program will be provided solely with State funding. Benefits received by two-parent households that are meeting the work requirement will be provided with Federal funds.

Permitting Reform 

Local governments often find the National Environmental Policy Act (NEPA) procedural process to be cumbersome and inefficient. Administrative burdens alone can be overwhelming for local governments whose resources are limited. In general, NLC supports efforts to modernize and streamline the NEPA process. Included in the bill is the BUILDER Act (H.R. 1577), which includes provisions to streamline NEPA, including: 

  • Codifying key elements of the One Federal Decision Framework, including development by the lead agency of a joint schedule, procedures to elevate delays or disputes, preparation of a single environmental impact statement, and joint Record of Decision to the extent practicable. 
  • Setting deadlines for completion of NEPA review at one year for environmental assessments and two years for environmental impact statements unless a deadline extension is agreed to by the project sponsor. 
  • Establishing page limits for environmental documents and paper reduction measures, 300 pages for complex projects and 150 pages for less complicated ones.  

These are the same streamlining provisions that were included in the House-passed energy bill (H.R. 1). The debt ceiling bill also modifieds NEPA to redefine the scope of environmental reviews to include "reasonably foreseeable environmental effects" of proposed agency actions and a "reasonable range" of alternatives to the proposed agency action. 

Student Loans 

For municipal workers, the modifications made by the Biden Administration to allow more people working in government to qualify for Public Service Loan Forgiveness will not be rolled back. Additionally, the Administration's plan to forgive up to $20,000 in debt for some student loan borrowers remains intact. However, a case is still pending before the Supreme Court on whether the Administration can forgive this debt. What the deal provides is that the Administration cannot further extend the pandemic-era freeze on student loan payments. The expiration of the pandemic emergency, which was the justification for the pauses, expired on May 11. 

We will continue to monitor this situation and report back accordingly. 

Contact: Paul Penna, Senior Legislative Analyst, ppenna@njlm.org, 609-695-3481, x110.

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