The New England Council's Analysis of the President's FY 2008 Budget.
On February 5, the President unveiled a $2.9 trillion FY 2008 budget that proposes to reduce the deficit every year and balance the budget by 2012. The budget would increase defense spending by 22 percent to $622 billion, including emergency appropriations for the Global War on Terror, while reducing non-defense discretionary spending for the third straight year. The President calls for a reduction in the growth of Medicare by $66 billion over the next five years and plans to reduce or eliminate 141 programs from throughout the federal government to achieve $122 billion in savings over five years.
Below is a targeted analysis of the President’s budget that examines programs of importance to the New England region.
Department of Transportation
Amtrak Funding
In last year’s budget, the President proposed $900 million in funding for Amtrak. After discussion by lawmakers about proposed reforms, Amtrak subsequently received approval for $1.3 billion in the FY 2007 joint funding resolution that was recently signed into law. The fact that additional funding was added to the continuing resolution so that a cut was avoided was a victory for New England’s economy, which benefits from Amtrak’s Northeast Corridor intercity rail system. For FY 2008, the President has once again requested $900 million in funding for Amtrak. The proposed FY 2008 funding level would require Amtrak to significantly reduce, if not completely shutdown, its operations. Of the total funds for FY 2008, $500 million would be provided for capital costs to assist in the restoration of rail infrastructure along the Northeast Corridor. The Council supports an increase in funding above the $1.3 billion allocated in FY 2007 so that infrastructure repairs can finally begin in earnest in order to maintain this critical asset for New England’s economy.
Department of Health and Human Services
Medicare/Medicaid
The Administration’s FY 2008 budget requests $699 billion for the Department of Health and Human Services (HHS), which is the same level of funding requested for FY 2007. Discretionary spending, however, would increase by $1.5 billion to $67.6 billion. Medicare and Medicaid, which make up the bulk of the department’s mandatory spending programs, will consume 86 percent of the HHS budget. The Administration’s proposal calls for Medicaid savings of nearly $2 billion in FY 2008 and $12 billion over five years.
The Administration also proposes more than a $4 billion cut in FY 2008 and a $66 billion cut in the rate of growth of Medicare over the next five years, by cutting hospital payments, establishing competitive bidding for lab services, and increasing premiums for high income seniors, among other reforms. Long term, the Administration hopes to save as much as $8 trillion over 75 years with the reforms to the program that it proposes. The New England Council has concerns over the President’s proposal to cut by 0.65 percent the hospital payment update for FY 2008. Hospitals in New England, especially community hospitals, would be significantly impacted.
Medicare Advantage
New England has one of the fastest growing aging populations in the nation. For those covered by Medicare, the Medicare Advantage (MA) program offers access to private health plans, which compete for lower prices for benefits, making health care more affordable for our region’s older population. The President’s budget would expand the existing MA program. According to the Administration, MA beneficiaries save an average of $82 per month in out-of-pocket costs compared to traditional Medicare, and beneficiaries in fair or poor health save significantly more. Although the Administration plans to cut traditional Medicare fee-for-service plans, those cuts would result in $15.2 billion in savings within MA over five years. Seventy-five percent of the extra money granted to the private plans would go toward additional health benefits for enrollees, such as vision and hearing screenings and treatments.
SCHIP
The President’s budget proposes to reauthorize the State Children’s Health Insurance Program (SCHIP) for five years to help States continue to provide health insurance to low-income, uninsured children. Under the Administration’s plan, SCHIP would receive an increase in funding of about $5 billion over five years. This amount represents only a portion of what is required to maintain coverage for current beneficiaries. The budget also proposes that the program re-focus on assisting children below 200 percent of the Federal Poverty Level (FPL). These cuts and inadequate funding come at a time when three of the six New England states are facing funding shortfalls in their SCHIP programs. Additionally, the move to scale the program back to 200 percent of FPL would especially impact New England states where the cost of living is generally higher than the national average and where current state SCHIP programs cover children in families with incomes up to 300 percent of FPL in four New England states and up to 250 percent in a fifth.
Community Health Centers
Community Health Centers have enjoyed widespread support throughout our region’s healthcare community for providing critical healthcare services to underserved areas and helping to keep healthcare costs and ER visits down. The joint funding resolution funds the program for FY 2007 at $1.988 billion, an increase of $206.9 million, and will finance 300 new or expanded health centers. Of the $206.9 million added for Community Health Centers in the funding resolution, $25 million will be directed to existing health centers. The President’s budget for FY 2008 requests $1.988 billion for Community Health Centers, which is a slight increase from last year’s request, but with the additional funding in the joint funding resolution, the centers would essentially receive flat funding from FY 2007 to FY 2008. Although the FY 2007 increase in funding is invaluable for Community Health Centers, projected static funding will inhibit the centers of New England and America from fully serving their targeted patient populations.
Health Information Technology (HIT)
Expanded use of health information technology is a New England Council priority. In accordance with the President’s August 2006 Executive Order to increase the transparency of America’s healthcare system, the budget request for health information technology has been increased to $165 million for FY 2008 to develop national standards and an interoperable infrastructure for electronic medical records. The Administration’s budget allocated $118 million for the Office of the National Coordinator for HIT, which is a $57 million increase over both the President’s FY 2006 request and the amount in the joint funding resolution for FY 2007. The proposed funding level includes $45 million for the Agency for Healthcare Research and Quality and $2 million for the Office of the Assistant Secretary for Planning and Evaluation. The Council applauds these efforts to accelerate the development of HIT.
Low Income Home Energy Assistance Program (LIHEAP)
The Low Income Home Energy Assistance Program’s (LIHEAP) budget has not kept pace with rising energy costs over the last several years. Although LIHEAP has been authorized for up to $5.1 billion in funding per year, actual funding has failed to adequately address the growing disparity between federal home heating assistance and actual home energy expenses.
The Administration’s budget requests $1.7 billion in funding for LIHEAP for FY 2008, which is a decrease in funding of nearly $900 million from the FY 2007 funding level. During the 109th Congress, several senators successfully passed a proposal that moved an additional $1 billion in LIHEAP funding from FY 2007 to FY 2006, but only $500 million of the emergency funding secured for FY 2006 was used. The remaining $500 million will, therefore, be added onto the continuing resolution funding level of $2.1 billion, providing $2.6 billion for LIHEAP. The President’s request for decreased funding would further diminish a program that is already funded at a level that is inadequate to serve the 32 million low-income Americans eligible for energy assistance and would fail to address the problem of rising energy costs for those most in need.
Department of Energy
Yucca Mountain Project
The New England Council has long supported the construction of the Yucca Mountain Nuclear Repository to help expedite the removal of high level radioactive waste and to avoid long-term storage at commercial nuclear power plant sites throughout our region. Last year’s budget included $544.5 million for the Yucca Mountain Nuclear Repository. The joint funding resolution for FY 2007 will fund the repository at $487 million. For FY 2008, the Administration’s budget requests $494.5 million toward continued construction of the Repository. Despite the decrease in funding from FY 2006, the Administration still plans to submit a license application to the Nuclear Regulatory Commission by June 2008, which could lead to a 2017 open date for the repository. The Department of Energy has raised concerns that the costs of building and licensing the project might not be covered by rate payer fees and federal government contributions. Without adequate funding, the project may be delayed even further. The Council continues to support efforts toward having the Yucca Mountain Nuclear Repository functional as soon as possible.
Department of Education
Higher Education and Federal Student Aid
Of the $58.6 billion requested in the budget for the Department of Education, $13.3 billion – a $623 million increase over last year’s budget request - would be allocated to increasing the maximum Pell Grant from $4,050 to $5,400 over five years. The Pell Grant maximum has not been increased in several years. The Supplemental Educational Opportunity Grants, which received level funding of $771 million over the past two years, would be eliminated to support the increase in funding for the Pell Grants. The Administration requested level funding for TRIO, GEAR UP, historically black college and graduate institutions, and Hispanic serving institutions. The New England Council recognizes the important role that higher education institutions play in driving the New England economy, and in order to maintain these institutions’ significant contributions, it is critical that the federal government help make higher education more affordable and make our graduates more competitive in the global market. The Council strongly supports an increase in the maximum Pell Grant and will continue to advocate for proposals that help make higher education more affordable.
&D Funding
New England is a world leader in areas such as information technology, defense technology, biotechnology and healthcare. These industries drive our regional economy. Increased research & development funding helps the region attract bright, enthusiastic individuals who have gained the knowledge and have been taught the skills to become valuable employees at our leading companies and institutions of learning, and allows New England to ensure that it continues to lead the world’s innovators.
The President’s budget would increase federal investment in research and development to $143 billion in FY 2008, which is $6 billion above last year’s request. The increase brings the funding level closer to keeping pace with inflation. The Administration also proposes to make the research and development tax credit permanent, a position long-held by the New England Council.
Overall, non-defense research funding would increase 9 percent to $63.7 billion. As part of the President’s American Competitiveness Initiative (ACI), funding for the Department of Energy's Office of Science (DOE SC), and the Department of Commerce's National Institute of Standards and Technology (NIST) would receive substantial budget increases. Funding for the DOE SC would increase 14 percent to $4.3 billion, and NIST intramural research would increase 10 percent over the President’s FY 2007 request to $586 million -- a 21 percent increase over the amount currently being considered in the joint funding resolution.
The President’s budget requests decreases in funding in other non-defense agencies. The Environmental Protection Agency’s R&D funding would fall another 1 percent below the level of funding for FY 2007 to $562 million. Also, the Department of Homeland Security, which had received R&D increases for several years, would see a decline for the second year in a row to $1.068 billion in FY 2008.
Total defense R&D would increase 1 percent to $78.8 billion. Department of Defense development alone would increase by $1.9 billion.
National Science Foundation (NSF)
Also as part of the ACI, the Administration’s 2008 budget provides a 6.8 percent boost over the previous year’s request for the National Science Foundation’s total budget to $6.4 billion. NSF’s R&D investments would total $5.1 billion, an 8.5 percent increase over the allocation for the agency in the FY 2007 joint funding resolution of $4.7 billion. All of the individual major research program activities at the NSF would receive increases over last year’s budget request. In addition, over 200 additional graduate fellowships in science and engineering would be funded in FY 2008, an effort that would work toward the Council’s goal of improving the science, technology, engineering and mathematics (STEM) education pipeline by attracting more of the nation’s most promising students into the research fields.
National Institutes of Health (NIH)
The President’s FY 2008 budget proposes funding the NIH at $28.7 billion, which is a $200 million decrease from the FY 2007 joint funding resolution appropriation of $28.9 billion. The request is $350 million more than the Administration’s FY 2007 request. Even compared with last year’s request, the increase does not account for inflation, meaning that for the fourth straight year, if Congress does not build upon the request, the NIH will essentially be flat funded and would continue to lose ground to inflation. Last year, the New England Council began advocating for a five percent increase in NIH funding, which would allow research to keep pace with inflation and provide for some growth to capitalize on unprecedented scientific opportunities spawned by past federal investments in biomedical research. This year, the Council will continue its advocacy efforts to increase NIH funding, which has supported research at New England institutions that has led to countless new treatments and even cures, and has been such an important driver of our regional economy.
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