1. Bad Things Come in Threes NCSL Fiscal Analysts Seminar October 9, 2013 Federal Funds Information for States www.ffis.org

2. Three months, three crises in the making • Continued government shutdown? • Increase the debt limit or default? • Turn off sequestration or live with BCA?

3. How did we get here? And where are we going? Source: CBO Long-Term Budget Outlook, 9/13

4. Focus on grants in the FFIS database Source: FFIS Grants Database

5. Implication of Shutdown on State Grant Programs?

6. Implication of Shutdown on State Grant Programs? • Do discretionary programs have new funds? • Title I, Special Education, WIA formula grants, FHWA • Prior-year funds? • Obligation deadline, funding period, carryover funds • Matching/MOE requirements? • How long does the shutdown continue? • State furloughs/hiring freezes, cash flow issues, IT issues • After October, everything changes

7. Debt Ceiling: Will the unthinkable happen? • Debt limit hit in May • October 22 – November 1: Unable to meet all obligations • Market uneasiness before • Bills paid from available cash • Prioritization of payments? • Individuals, providers, states don’t receive payments • Widespread uncertainty, risks(economy, interest rates, global markets)

8. The BCA is the law of the land • Discretionary spending caps (saves $917 billion/10 yrs.) • Joint Select Committee on Deficit Reduction (failed) • Sequestration ($1.2 trillion in savings/9 yrs.) • $984 billion in cuts through FY 2021 ($109 billion per year) • Split equally between defense/nondefense • Many mandatory and a few discretionary programs exempt (special rules for some programs)

9. Sequestration in FY 2013 vs. FY 2014

10. No paths conform to BCA in FY 2014

11. Under BCA, increases after FY 2014

12. Is there a way out? • House, Senate agree to short-term CR, debt limitincrease, rolling all three issues into one debate/timeframe (mid-December?) • BCA is amended to provide additional defense spending in FY 2014, possibly achieved by extending BCA caps for a few years beyond 2021 • Negotiations include mandatory spending, tax reform

13. Clear as mud? Questions? For more information: www.ffis.org, Trinity Tomsic (ttomsic@ffis.org)