Last Friday, September 14, the White House officially released a report prepared by the Office of Management and Budget (OMB) detailing how the federal government would implement sequestration under the Budget Control Act of 2011 (BCA; PL 112-25). The administration was required to submit this report to Congress under the Sequestration Transparency Act of 2012 (STA) (PL 112-155). The report conveys information on which budget accounts are exempt or subject to sequester, funding reduction estimates that would be required non-exempt accounts, an explanation of the methodology used to prepare the report, and additional information on the implementation of sequestration. Please note that the report has certain limitations – for example, its calculations are based on fiscal 2012 appropriated levels rather than fiscal 2013, and its organization by federal account rather than grant program may make it less easy for some state agencies to analyze.
A full copy of the report is available at:
http://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/stareport.pdf
States are closely monitoring how sequestration could potentially affect their budgets, both directly through federal funding reductions and indirectly through adverse effects on the economy. Last week, NASBO hosted a members-only conference call to provide state budget officers an opportunity to discuss the potential impacts of sequestration, and discuss possible state efforts to plan for pending federal budget cuts. Additionally, Trinity Tomsic, Deputy Director for Federal Funds Information for States (FFIS), joined the call to provide an overview of sequestration and to help answer states’ questions that continue to arise from significant uncertainties at the federal level. Since there is still enormous uncertainty as to what will ultimately occur, many states are considering developing various contingency plans as to how to react to , or how to react to an alternative scenario entailing federal budget cuts. States still need more detailed information from the federal government, particularly on the degree of flexibility that federal and state governments will have in administering cuts to current streams of funding. States are also beginning to determine what actions they may need to take during the latter part of their fiscal year 2013 if federal budget cuts – either by sequester or other ways – are implemented. This may include instructing recipients of federal monies to carefully manage their funds in anticipation of a sudden cut to federal funds. Of course, no one is certain as to what actions the Congress and Administration will take on this issue, but good financial management principles still call for the development of contingency plans.