March 12, 2007

President submits revision to FY'07 War Supplemental-- calls for domestic cuts as offsets;
Senate Republicans oppose efforts to add minimum wage, tax cuts to bill

Since Friday's Budget Alert , there have been two major developments regarding the FY '07 Supplemental Appropriations Bill. First, on Saturday, March 10, the President released a revision to his earlier supplemental request. Second, Senate Republicans are opposing efforts to attach the House Democrats' minimum wage/small business tax cuts package to the supplemental bill. Highlights follow:

• On Saturday, March 10, the White House released the President's proposed revisions to his FY'07 war supplemental request. The total request of $99.6 billion for Iraq, Afghanistan and the "Global War on Terror" did not change, but $3.2 billion would be re-directed to the troop surge in Iraq, increased combat operations in Afghanistan, counter-terrorism efforts in Pakistan, and the establishment of a new $50 million medical care fund. Specifically, the requested '07 increases include:
• $1.5 billion for additional armor kits and transport vehicles in Iraq, including $500 million for "mine resistant" vehicles;

• $769 million for operations and personnel for the surge in Iraq;

• $150 million for "provincial reconstruction teams" in Iraq;

• $100 to help reestablish state-owned factories in Iraq;

• $272 million for an additional Brigade Combat Team in Afghanistan;

• $99 million for intelligence and support activities in Afghanistan;

• $139 million for training of Afghan forces;

• $110 million for counter-terrorism in Pakistan; and

• $50 million to establish a new "medical care fund," while the new bipartisan commission is reviewing the status of current military and veterans health care.

The additional $3.2 billion would be offset by:

• Eliminating funding for 5 C-130J aircraft, 1 CV-22 aircraft, and 2 Joint Strike Fighter aircraft;

• Reduced funding for 5 EA-18G fighter aircraft;

• Eliminating funding for a new logistics control system and new information systems;

• Reduced funding for lower priority equipment procurement;

• Reduced funding for the "Regional War on Terror" which refers to counter-terror efforts within the continental U.S., Alaska, Canada, Mexico and surrounding waters;

• Reduced naval force cost projections;

• Reduced cost projections to grow the permanent force;

• Reduced fuel cost projections;

• Reduced requirements for transportation of coalition forces; and

• Reduced military construction in Afghanistan, Iraq and Guantanamo Bay.

President's Defense Amendments to the FY'07 Supplemental Request

• On Saturday, March 10, the White House also released the President's proposal to rescind (cancel) FY'07 funding for various domestic programs in order to pay for $3.1 billion in costs associated with the Department of Defense Base Realignment and Closure (BRAC) process. According to the Administration the BRAC expenditures in '07 are necessary to continue scheduled redeployments from overseas stations to the U.S. and to accommodate planning in affected communities.

• The House Democratic draft supplemental already includes the requested $3.1 billion. However, unlike the House proposal, the President proposes the following cuts in domestic programs to offset the BRAC expenditures:

  • $892 million from the Dept. of Education including cuts in career and technical state grants, technology state grants, Even Start, and the Educational Assistance Partnership Program;

  • $740 million from the Community Development Block Grant program;

  • $677 million from the Department of Transportation including $393 million in Amtrak cuts and $284 million in Airport Improvement cuts.

  • $245 million from the Department of Agriculture including cuts in Hatch Act formula grants, energy grants, trade adjustment assistance, and rural enterprise grants;

  • $200 million from the environmental management program at the Department of Energy;

  • $118 million from the Centers for Disease Control and Prevention;

  • $79 million from the Department of Commerce's Advanced Technology Program;

  • $77 million from the Department of the Interior including cuts in the Bureau of Indian Affairs Education Construction program and $28 million from the Land and Water Conservation Fund Grants; and

  • $50 million in "low priority" Corp of Engineers investigations.

    President's Request to Cancel $3.1 billion

• Merging Minimum Wage / Tax Relief into the Supplemental: Late last week, House Speaker Nancy Pelosi (D-CA) indicated that House Democrats would merge into the impending FY'07 Supplemental bill, legislation to increase the minimum wage by $2.10 and provide $1.3 billion in small business tax relief. The minimum wage bill (HR 2) and small business tax relief (HR 976) have been approved by the House separately, but have been in legislative limbo due to disagreements with the Senate over the appropriate size of the tax relief component. Small business tax relief provisions were developed to attract Republican support for the minimum wage increase.
• Senate Minority Leader Mitch McConnell (R-KY), Minority Whip Trent Lott (R-LA), and Senate Finance Ranking Republican Charles Grassley (R-IA) all indicated their strong opposition to the maneuver on Friday, March 9.

• In addition to the jurisdictional issues raised by the Minimum Wage maneuver, the biggest hurdle for the '07 Supplemental remains the Iraq redeployment timeline included in the bill by House Democratic leaders, drawing a White House veto threat.

FY'07 SUPPLEMENTAL SCHEDULE

• Week of March 12: House Appropriations Committee mark-up.
• Week of March 19: House Floor action.
• March 20: Senate Appropriations Committee mark-up.
• Week of March 26: Possible Senate Floor action.

FY'08 BUDGET PROCESS: STEP-BY-STEP™

• March 14, 15: Senate Budget Committee mark-up of FY 2008 Budget Resolution.

Context: The Budget Resolution is a concurrent resolution of the Congress that establishes a general framework for subsequent congressional action on spending and revenue bills. It does not require presidential signature and does not become law . It includes spending and revenue totals, committee allocations, budget enforcement rules, and may also include optional Reconciliation Instructions (to expedite entitlement and tax changes) and Reserve Funds (to adjust committee allocations to accommodate new spending programs provided they are deficit-neutral).

• Week of March 19: House Budget Committee mark-up.
• Week of March 19: Senate Floor action.
• Week of March 26: House Floor action.

Click here for a revised and thorough comparision between the President's proposed FY2007 War Supplemental and the House Democrat's plan.