Conference Report on S. Con. Res. 95, Concurrent Resolution on the Budget for Fiscal Year 2005 - Part 3

The resolution does not accept the Administration's cuts to State and Private Forestry, and instead assumes $429 million, the same level of funding as last year. The Committee recognizes the important role that these programs play in order to implement cooperative forestry across federal, state and private lands.

The resolution assumes $5 million will be spent within the Bureau of Land Management on wilderness proposals resulting from the collaborative process.

The resolution supports payments of $53 million in 2005 and $265 million over 5 years from the Abandoned Mine Reclamation Fund to the certified public lands states.

The resolution supports continued funding of programs within the expired Conservation Spending Caps.

The resolution assumes $100 million for Pacific Coastal Salmon Recovery. This is an $11 million increase over last year's level and the same as the President's request.

The resolution assumes that $410 million from mandatory Farm Bill conservation programs will be used as discretionary offsets in 2005.

During floor debate on the Senate resolution, the Senate accepted a Wyden amendment (SA 2717) by voice vote which added $343 million in 2005 to this function for hazardous fuels reduction and reduced function 920 by the same amount. In addition, the Senate accepted a Crapo amendment (SA 2784) by voice vote that added $3 billion in 2005 to this function for the EPA clean and safe drinking water revolving funds and was offset in function 920.

Mandatory

The Senate passed resolution assumes the President's proposal allowing the Park Service to change rental payments to the city of San Francisco for the Hetch Hetchy Dam in Yosemite National Park.

The resolution assumes a technical correction to the baseline that will allow technical assistance for the Conservation Reserve Program and the Wetlands Reserve Program to come out of mandatory Agriculture funds as was intended in 2002 Farm Bill.

The Committee adopted an amendment by Senator Grassley during the Committee markup that added $531 million over five years to this function to support farm conservation programs.

House Amendment

The amendment calls for $31.2 billion in budget authority and $30.9 billion in outlays in fiscal year 2005. The function totals are $159.6 billion in budget authority and $159.9 billion in outlays over five years. Mandatory spending is $2.7 billion in budget authority and $1.8 billion in outlays in fiscal year 2005. Over the 2005-2009 period, mandatory spending increases by $15.7 billion in budget authority and $15.3 billion in outlays. Discretionary spending is $28.5 billion in budget authority and $29.1 billion in outlays in fiscal year 2005; and over five years, it is $143.9 billion in budget authority and $144.6 billion in outlays.

Mandatory

The assumptions accommodate legislation, H.R. 313, to assist the United Mine Workers of America Combined Benefit Fund in averting financial crisis by transferring to it any additional interest from the Abandoned Mine Land Reclamation Fund. The measure was reported by the Committee on Resources on 1 October 2003. The resolution also accommodates legislation that passed the House last year and is awaiting Senate action to increase the waiver requirement for certain local matching requirements for grants provided to American Samoa, Guam, the Virgin Islands, or the Commonwealth of the Northern Mariana Islands. These assumptions are reflected in the allocation to the Committee on Resources, which is free to determine its own policies within the allocation limits. The accommodation is necessary to allow for a potential conference agreement.

Discretionary

The amendment can accommodate full funding for the Healthy Forests Initiative legislation (H.R. 1904) signed into law last year. The Healthy Forests Initiative is a critical tool for reducing the threat of severe wildfire and insect infestation in heavily forested communities.

The amendment also can accommodate full funding for numerous other Federal agencies and programs, including the Army Corps of Engineers, the Superfund program, and reducing the Operations and Maintenance backlog within the National Park Service.

Outyear levels are not binding and will be revisited in subsequent years.

Conference Agreement

The conference agreement for this function reflects total spending of $32.1 billion in budget authority and $31.4 billion in outlays for fiscal year 2005. Mandatory spending for this function is $2.8 billion in budget authority and $1.8 billion in outlays in fiscal year 2005. Discretionary spending for this function is $29.3 billion in budget authority and $29.7 billion in outlays in fiscal year 2005.

The agreement assumes a technical correction to the baseline that will allow technical assistance for the Conservation Reserve Program and the Wetlands Reserve Program to come out of mandatory agriculture spending.

The funding levels in this agreement assume funding levels equal to the 10 year average for wildland fire suppression within the Forest Service and Department of Interior.

The agreement can accommodate level funding for the Army Corps of Engineers.

The conferees support restoring funding for beach renourishment projects for local communities with contractual agreements with the Army Corps of Engineers. These projects are critical for combating erosion caused by the federal government's coastal navigation construction projects.

Function 350: Agriculture

Function Summary

Function 350 includes funds for direct assistance and loans to food and fiber producers, export assistance, market information, inspection services, and agricultural research. Farm policy is driven by the Farm Security and Rural Investment Act of 2002, which provides producers with continued planting flexibility while protecting them against unique uncertainties such as poor weather conditions and unfavorable market conditions.

Function 350 budget authority fell from $23.9 billion in 1999 to $20.2 billion in 2004, a 3.3 percent average annual reduction rate. During the same time period, outlays dropped from $22.9 billion to $18.8 billion, a 3.9 percent average annual reduction rate. The primary reason for this reduction is more favorable overall commodity prices. Commodity prices often fluctuate from year to year. This has a significant impact on mandatory programs, which account for the vast majority of spending within Function 350.

Senate Resolution

Discretionary

The resolution assumes discretionary spending in this function of $5.4 billion in budget authority and $5.6 billion in outlays for 2005. This represents a decrease of $0.2 billion in budget authority and an increase of $0.1 billion in outlays from the 2004 level. The Committee-reported resolution includes the following specific assumptions:

The resolution assumes an increase of $294 million in budget authority from last year's level for activities related to homeland security, a 94 percent increase over last year. This includes a $115 million increase for the Agriculture Research Service to provide for the acceleration of the completion of the animal research lab in Ames, Iowa.

The resolution assumes an increase of $85 million over last year for activities to respond to the discovery of Bovine Spongiform Encephalopathy [BSE] in the United States and Canada. Of this increase, $50 million is in this function for the Animal and Plant Health Inspection Service. The remaining $35 million increase is for the Food Safety Inspection Service and appears in function 550.

The resolution assumes $105 million for PL 480 Title I funding. This is the same as last year, but $15 million over the President's request.

The resolution did not accept any of the Administration's proposed user fees for this function.

The resolution assumes $260 million in discretionary savings by blocking funding for the Initiative for Future Agriculture and Food Systems. This proposal was enacted in the 2004 Agriculture Appropriations Bill.

Mandatory

The resolution includes an amendment (by Senator Grassley) adopted during mark-up to reduce farm program payments in this function and provide additional funds for agriculture conservation programs, food nutrition programs and rural development programs in functions 300, 450 and 600.

House Amendment

The amendment calls for $21.1 billion in budget authority and $20.5 billion in outlays in fiscal year 2005. The function totals are $117.7 billion in budget authority and $112.9 billion in outlays over five years. Mandatory spending is $16.3 billion in budget authority and $15.4 billion in outlays in fiscal year 2005. Over the 2005-2009 period, mandatory spending increases by $93.4 billion in budget authority and $88.4 billion in outlays. Discretionary spending is $4.8 billion in budget authority and $5.1 billion in outlays in fiscal year 2005; and over five years, it is $24.3 billion in budget authority and $24.6 billion in outlays.

Mandatory

The amendment assumes no new mandatory spending proposals.

Discretionary

The amendment can accommodate full funding for enhanced efforts to protect the food supply from Bovine Spongiform Encephalopathy [BSE], or Mad Cow Disease, as well as other important food safety and agricultural research programs within function 350. Outyear levels are not binding and will be revisited in subsequent years.

Conference Agreement

The conference agreement for this function reflects total spending of $21.8 billion in budget authority and $21.0 billion in outlays for fiscal year 2005. Mandatory spending for this function is $16.5 billion in budget authority and $15.5 billion in outlays in fiscal year 2005. Discretionary spending for this function is $5.3 billion in budget authority and $5.5 billion in outlays in fiscal year 2005.

The conference agreement assumes funding for agriculture related homeland security activities that could accommodate a substantial increase in Agriculture Research Service.

FUNCTION 370: COMMERCE AND HOUSING CREDIT

Function Summary

Function 370 includes four components: mortgage credit (usually negative budget authority because receipts tend to exceed the losses from defaulted mortgages); the Postal Service (mostly off budget); deposit insurance (negative outlays resulting from payment of deposit insurance premiums currently more than outweigh low outlays for losses); and other advancement of commerce (the majority of the discretionary and mandatory spending in this function). This last component includes most of the Commerce Department, including the International Trade Administration, Bureau of Economic Analysis, Patent and Trademark Office, National Institute of Standards and Technology, National Telecommunications and Information Administration, and the Bureau of the Census; as well as independent agencies such as the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Federal Trade Commission, the Federal Communications Commission, and all the activities of the Small Business Administration that are not related to disaster assistance.

About $7 billion of the spending in function 370 is out of the FCC's Universal Service Fund, which subsidizes service to rural and low-income users, high-cost areas, and public institutions such as schools and libraries. This spending has no net impact on the deficit because it is offset on the revenue side of the budget by fees collected by providers of telecommunications services from their customers.

Senate Resolution

Discretionary

The Senate resolution assumes discretionary spending in this function of $1.8 billion in budget authority and -$0.5 billion in outlays for 2005 (several activities in this function are funded by offsetting collections that exceed the level of spending). The Senate resolution includes the following specific assumptions:

The President's requested increases in 2005 (compared to 2004) for conducting the decennial census (45 percent), for strengthening the Securities and Exchange Commission (12.4 percent), and for making homeland security investments in the Department of Commerce (4.6 percent).

The President's budget proposes to eliminate the Advanced Technology Program [ATP] in the Department of Commerce because private investors are better able than the federal government to decide which research efforts should be funded. The U.S. venture-capital markets are the best developed in the world, do an effective job of funding new ideas, and focus on many of the same research areas as the ATP. Venture-capital funds have grown enormously since the ATP was conceived. Therefore, this proposal is reflected in the Senate resolution.

The President's budget proposes to terminate payments of tariffs (collected under antidumping or countervailing duty orders) over to affected industries. Before 2001, these tariffs were deposited in and retained by the Treasury. Since then, the tariffs have become mandatory payments. The World Trade Organization has ruled that such payments violate international trade agreements. On March 2, 2004, CBO released an analysis of these payments that said the following:
The Continued Dumping and Subsidy Offset Act [CDSOA] of 2000 can be expected to result in more antidumping and countervailing-duty petitions and more support for those petitions by import-competing industries. That, in turn, would lead to the initiation of more AD/CVD cases, the imposition of more duties, and greater consequent harm to the economy as a whole ..... Under CDSOA, the firm sees a lower cost than the true cost to the economy of its output. As a result, the firm increases its output beyond the point where the unsubsidized cost to the firm-and thus to the economy-is balanced by the price. Since the price or value is less than the cost to the economy of that additional output, the economic welfare of the country is reduced ..... Consequently, U.S. gross domestic product and gross national product decline.

This proposal is assumed in the Senate resolution, saving $1.45 billion in budget authority in 2005.

The Senate resolution reflects the Snowe amendment (SA 2839) adopted by a voice vote in the Senate to increase the level in this function by $121 million in budget authority in 2005 for programs of the Small Business Administration. The amendment included a corresponding negative entry for function 920 to result in no net effect on the overall budget.

Mandatory

The Senate resolution assumes no mandatory increases or decreases in this function.

House Amendment

For on-budget amounts, the House amendment calls for $10.8 billion in budget authority and $5.8 billion in outlays in fiscal year 2005. The function totals are $50.0 billion in budget authority and $23.3 billion in outlays over five years. Mandatory spending is $9.7 billion in budget authority and $4.8 billion in outlays in fiscal year 2005, and totals $44.4 billion in budget authority and $17.7 billion in outlays over five years. Discretionary spending is $1.1 billion in budget authority and $1.0 billion in outlays in fiscal year 2005; and over five years, it is $5.6 billion in budget authority and $5.6 billion in outlays.

Discretionary

The Committee on Appropriations will determine how funds will be apportioned among the various discretionary programs. Specific programs will be increased or decreased when the Appropriations subcommittees write their respective bills. Outyear levels result from applying a simple computation of modest growth, consistent with the President's budget. Outyear levels are not binding and will be revisited in subsequent years.

Mandatory

The House amendment accommodates the following measures: H.R. 758, the Business Checking Freedom Act, which passed the House on 1 April 2003; H.R. 522, the Federal Deposit Insurance Reform Act of 2003, which passed the House on 2 April 2003; and H.R. 1375, the Financial Services Regulatory Relief Act of 2003, which passed the House on 18 March 2004. All three bills are awaiting action in the Senate. The assumptions are reflected in the allocation to the Committee on Financial Services.

Conference Agreement

For on-budget spending, the conference agreement for this function reflects $9.3 billion in budget authority and $3.3 billion in outlays for fiscal year 2005. Discretionary spending for this function is -$0.4 billion in budget authority and -$0.2 billion in outlays in fiscal year 2005. On-budget mandatory spending for this function is $9.7 billion in budget authority and $3.5 billion in outlays in fiscal year 2005.

Including on- and off-budget spending, the conference agreement for this function reflects total spending of $7.2 billion in budget authority and $1.2 billion in outlays for fiscal year 2005. Discretionary spending for this function is -$0.4 billion in budget authority and -$0.2 billion in outlays in fiscal year 2005. Mandatory spending for this function is $7.6 billion in budget authority and $1.4 billion in outlays in fiscal year 2005.

Function 400: Transportation

Function Summary

Function 400 includes the Federal Highway Administration; the Federal Transit Administration; the National Rail Passenger Corporation [Amtrak]; highway, motor carrier and rail safety programs; the Federal Aviation Administration; the aeronautical activities of the National Aeronautics and Space Administration; the Coast Guard; and the Maritime Administration.

Function 400 budget authority rose from $51.6 billion in 1999 to $69.2 billion in fiscal year 2004, a 6.1 percent average annual growth rate. During the same time period, outlays rose from $42.5 billion to $65.7 billion, a 9.1 percent average annual growth rate.

Senate Resolution

Discretionary

The Senate resolution assumes discretionary spending in this function of $23.8 billion in budget authority and $66.2 billion in outlays for 2005. This represents an increase of $0.1 billion in budget authority and $2.3 billion in outlays from the 2004 level.

The Senate resolution reflects the President's full request for the homeland security activities in this function (a 13.2 percent increase over 2004).

Discretionary and Mandatory

The budgetary presentation of federal transportation programs is complicated by the fact that most of the budget authority for the programs is (because of committee jurisdictions) classified as mandatory while the related outlays are considered discretionary. The Senate-passed surface transportation bill for highways and transit (S. 1072--SAFETEA) exceeded the level allowed by the fiscal year 2004 budget resolution by $41 billion in contract authority over 2004-2009. In addition, the bill would increase the deficit by spending a net of $30 billion (over the next six years) more than the highway trust fund revenues that would be collected under current law (estimated to be $228 billion over 2004-2009, only a 14.6 percent increase over the $199 billion in highway trust fund receipts that were collected over 1998-2003 during TEA-21.)

The Administration has informed Congress that the President's senior advisors would recommend that he veto S. 1072 as passed by the Senate. In light of this veto threat, the Senate resolution reflects the President's request for surface transportation mandatory contract authority (with related outlays on the discretionary side of the budget) for the next five years. As in the 2004 budget resolution, the Senate resolution for 2005 includes a mechanism by which these initial levels could be increased if legislation is considered by the Senate that would levy and deposit net new transportation user fee revenues (which are not already being collected by the federal government under current law) into the Highway Trust Fund.

The President's proposal for the transportation reauthorization bill is $256 billion (in terms of the figures usually discussed, this includes both contract authority as well as an authorization of $8 billion in discretionary budget authority for transit programs for 2004-2009). This is a 17 percent increase over the total level enacted in the previous authorization bill [TEA-21], which was $218 billion for 1998-2003. In contrast, according to the CBO estimate of the bill as passed by the Senate, S. 1072 totals $322 billion (including discretionary budget authority for transit), which is a 48 percent increase over TEA-21 and is 26 percent more than the President's request.

House Amendment

The House amendment calls for $65.0 billion in budget authority and $62.0 billion in outlays in fiscal year 2005. The function totals are $339.4 billion in budget authority and $328.3 billion in outlays over five years. Mandatory spending is $47.2 billion in budget authority and $2.0 billion in outlays in fiscal year 2005, and totals $249.6 billion in budget authority and $8.8 billion in outlays over five years. Discretionary spending is $17.8 billion in budget authority and $60.0 billion in outlays in fiscal year 2005; and over five years, it is $89.8 billion in budget authority and $319.5 billion in outlays. Homeland security components formerly found in Function 400--including the Transportation Security Administration, the United States Coast Guard, and the Federal Air Marshals-are recorded in Function 100: Homeland Security, and are consistent with the President's request.

Discretionary

Specific programs will be increased or decreased when the Appropriations subcommittees write their respective bills. Outyear levels are not binding and will be revisited in subsequent years.

Mandatory

The House amendment creates a reserve fund that allows the chairman of the House Budget Committee to adjust the allocation of budget authority to the Committee on Transportation and Infrastructure for any measure that reauthorizes surface transportation programs and provides new budget authority for highway and transit spending. The adjustment may only be made if it is offset by changes in law, either included in the same measure or by previously enacted legislation. The language in the House amendment regarding this contingency measure is identical to that included in the budget resolution for fiscal year 2004.

The House amendment assumes a stream of mandatory budget authority for a reauthorization of surface transportation programs. It also creates a reserve fund to provide additional budget authority for such a bill to the extent that it is offset in the same or other legislation.

Conference Agreement

The conference agreement for this function reflects total spending of $71.8 billion in budget authority and $68.6 billion in outlays for fiscal year 2005. Discretionary spending for this function is $24.1 billion in budget authority and $66.4 billion in outlays in fiscal year 2005. Mandatory spending for this function is $47.7 billion in budget authority and $2.2 billion in outlays in fiscal year 2005.

Regarding the levels for the reauthorization of the highway bill, the Senate recedes to the House. The conference agreement includes an adjustment mechanism (section 311) to accommodate higher spending than the levels assumed in the conference agreement to the extent the additional spending is offset through reduced outlays from, or additional receipts to, the Highway Trust Fund.

Function 450: Community and Regional Development

Function Summary

Function 450 includes programs that provide Federal funding for economic and community development in both urban and rural areas, including: Community Development Block Grants [CDBGs]; the non-power activities of the Tennessee Valley Authority; the non-roads activities of the Appalachian Regional Commission; the Economic Development Administration [EDA]; and partial funding for the Bureau of Indian Affairs. Funding for disaster relief and insurance-including the Federal Emergency Management Agency [FEMA], now part of the Department of Homeland Security [DHS]--also appear here.

Function 450 budget authority rose from $11.3 billion in fiscal year 1999 to $16.7 billion in fiscal year 2004, an 8.2 percent average annual growth rate. During the same time period, outlays rose from $11.9 billion to $16.7 billion, a 7 percent average annual growth rate.

A factor in this growth was the presence of Federal Emergency Management Agency [FEMA] funding for first responders and one-time New York City recovery funds in the wake of the events of 9-11.

Senate Resolution

Discretionary

The Senate resolution assumes discretionary spending in this function of $13.5 billion in budget authority and $15.2 billion in outlays for 2005, a decrease of $2.2 billion in budget authority and $0.9 billion in outlays from the 2004 level. The Senate resolution includes the following specific assumptions:

For the Office of Domestic Preparedness, the Senate resolution fully supports the President's proposal for first responders and assumes $3.6 billion to ensure that they are properly trained and equipped. This includes $500 million for assistance to firefighters and $500 million for state and local law enforcement antiterrorism activities. Since 2001, Congress has appropriated close to $15 billion (or $20 billion if programs outside the Department of Homeland Security are included) for state and local first responders. The Senate notes with concern reports about misuse of money provided to states and localities under this program and supports policies to ensure these funds are being properly spent.

The Senate resolution assumes $3.0 billion in 2005 for disaster relief activities. This level is consistent with the average annual cost of (non-terrorist) disaster events over the past five years. This includes $2.2 billion in new budget authority, as well as money left over from prior years. This $2.2 billion in new money represents an increase of $384 million, or 21.7 percent, over the 2004 level.

The Senate resolution supports the pre-disaster mitigation grant program that helps communities prevent, rather than react to, disasters. The Senate resolution assumes $169 million for the program, an amount equal to last year's level.
The Senate resolution assumes continuation of the Community Development Block Grant Program, but proposes to target CDBG entitlement grants to lower income communities.

The Senate resolution reflects a Dorgan amendment, (SA 2850) adding $260 million in budget authority in 2005 (and in each year thereafter through 2009) for a new Homestead Venture Capital Fund.

Mandatory

The Senate resolution assumes a savings proposal that would deny federal flood insurance for certain repeatedly flooded properties. The National Flood Insurance Program [NFIP] currently insures roughly 45,000 repeatedly flooded properties, representing about 1 percent of all policies in force but accounting for a much larger share of annual flood losses.

House Amendment

The House amendment calls for $11.9 billion in budget authority and $14.2 billion in outlays in fiscal year 2005. The function totals are $58.7 billion in budget authority and $61.2 billion in outlays over five years. Mandatory spending is $402 million in budget authority and -$183 million in outlays in fiscal year 2005, and totals $780 million in budget authority and -$924 million in outlays over five years. The negative figures appear because of receipts to revolving loan funds. Discretionary spending is $11.5 billion in budget authority and $14.4 billion in outlays in fiscal year 2005; and over five years, it is $57.9 billion in budget authority and $62.2 billion in outlays.

Mandatory

The House amendment assumes no new mandatory spending proposals.

Discretionary

The House amendment does not assume specific levels for individual discretionary programs within Function 450. Instead, $11.5 billion in budget authority and $14.4 billion in outlays in fiscal year 2005 is assumed for overall discretionary spending within the function. The Committee on Appropriations will determine how these funds will be apportioned among the various discretionary Community and Regional Development programs. Outyear levels are not binding and will be revisited in subsequent years.

Conference Agreement

The conference agreement for this function reflects total spending of $13.6 billion in budget authority and $17.4 billion in outlays. Mandatory spending for this function is $0.4 billion in budget authority and -$0.2 billion in outlays in fiscal year 2005. Discretionary spending for this function is $13.2 billion in budget authority and $17.6 billion in outlays in fiscal year 2005.

Function 500: Education, Training, Employment, and Social Services

Function Summary

Function 500 primarily covers federal spending within the Departments of Education, Labor, and Health and Human Services for programs that directly provide-or assist states and localities in providing-services to young people and adults. Its activities provide developmental services to low-income children; help fund programs for disadvantaged and other elementary and secondary school students, make grants and loans to post secondary students, and fund job-training and employment services for people of all ages.

Function 500 budget authority rose from $55.5 billion in 1999 to $89.5 billion in 2004, a 10 percent average annual growth rate. During the same period, outlays rose from $50.6 billion to $86.5 billion, an 11.3 percent average annual growth rate.

Senate Resolution

Discretionary

The Senate resolution assumes discretionary spending in this function of $83.9 billion in budget authority and $78.3 billion in outlays for 2005. This represents an increase of $5.9 billion (7.5 percent) in budget authority and $1.2 billion in outlays from the 2004 level. The resolution includes the following specific assumptions:

Consistent with the President's proposals, the increases assumed in the Senate resolution would bring our Nation's overall investment in elementary and secondary education to nearly $500 billion, surpassing spending on our national defense and exceeding per-pupil education spending of every other nation except Switzerland.

The Senate resolution includes $13.3 billion in 2005 for Title I grants to Local Education Agencies [LEAs]--the largest component of the No Child Left Behind Act. The $1.0 billion (8.1 percent) increase over 2004 would fund services to disadvantaged students and improvements for low-performing schools. At this level, funding for Title I grants would be $4.6 billion (52 percent) greater than in 2001.

The Senate resolution would increase funding for Part B Grants to States for individuals with disabilities by $1.0 billion in each of the next two years. This is the fourth in a series of consecutive $1.0 billion annual increases, which cumulatively have raised the Federal share of average per pupil expenditures to nearly 20 percent, the highest level of Federal support ever provided to disabled children. With 2005 funding at $11.1 billion, funding for Part B Grants would reflect an increase of $4.7 billion (75 percent) since 2001.

The Senate resolution does not incorporate any of the President's program terminations. However, the resolution supports the President's effort to eliminate duplicative and unproductive programs and encourage the Appropriations Committees to carefully examine these proposals to maximize efficient use of taxpayer dollars during this challenging budget cycle.

For Pell Grants, the Senate resolution assumes a $2.7 billion increase over 2004, which provides a total of $14.7 billion to fully fund a $4,500 maximum award. This level reflects the Senate's adoption of the Coleman amendment (SA 2821), which increased the level assumed for Pell Grants by $1.9 billion. The amendment included a corresponding negative entry for function 920 to result in no net effect on the overall budget. In recent years, the shortfall in the Pell Grant program has grown dramatically due to insufficient appropriations. The program may not continue to be financially viable unless this shortfall is addressed.

The resolution also incorporates the $0.9 billion cost of Senators Dorgan and Brownback's American Heartland amendment (SA 2850), which provides 50% loan forgiveness to recent graduates who live and work in out migration counties. In addition, the resolution incorporates the cost of the Enzi-Cantwell amendment (SA 2832), which added $250 million in 2005 for job training funding under the Workforce Investment Act.

Currently, the administrative expenses of the Federal Direct Student Loan Program receive a permanent mandatory appropriation. No other federal credit program has such a mandatory appropriation for administrative expenses. Instead, they are subject to annual review by the Appropriations committee. The Senate resolution, consistent with the President's proposal, assumes shifting the $795 million in mandatory spending for these administrative expenses (Sec. 458) to an annual discretionary appropriation.

The resolution recognizes how important the Impact Aid Program is for school districts serving the needs of federally connected children throughout the country especially the emotional and family needs of military dependent children during this time of conflict in Iraq. The resolution urges that sufficient resources be provided allowing school districts to maintain the same level of service as what they were able to provide in fiscal year 2004.

Mandatory

The Senate resolution provides a reserve fund to facilitate consideration of the Higher Education Reauthorization. This fund provides a total of $5 billion to the Health, Education, Labor and Pensions [HELP] Committee for the 2005-2009 period. These funds may be used to increase student loan limits, reduce borrower origination fees or maintain the existing variable rate interest structure for Stafford loans after 2006.

House Amendment

The amendment calls for $92.5 billion in budget authority and $90.5 billion in outlays in fiscal year 2005. The function totals are $470.5 billion in budget authority and $465.4 billion in outlays over 5 years. Mandatory spending is $11.8 billion in budget authority and $10.0 billion in outlays in fiscal year 2005, and totals $63.0 billion in budget authority and $55.5 billion in outlays over 5 years. Discretionary spending is $80.7 billion in budget authority and $80.5 billion in outlays in fiscal year 2005, and totals $407.4 billion in budget authority and $409.9 billion in outlays over 5 years.

Mandatory

The assumptions accommodate H.R. 438, the Teacher Recruitment and Retention Act of 2003, which passed the House on 9 July 2003 and is awaiting action in the Senate. The assumption is reflected in the allocation to the Committee on Education and the Workforce, which is free to determine its own policies within the allocation limits.

Discretionary

The amendment gives Function 500 priority status within the overall framework of level funding for fiscal year 2005 in non-defense, non-homeland-security spending. The resolution calls for an increase from level funding of $2.8 billion in budget authority and $3.6 billion in outlays. This increase is intended to accommodate increases in the funding levels for priority programs, such as special education state grants, Title I grants to local education agencies, and Pell Grants for low-income college students. Outyear levels are not binding and will be revisited in subsequent years.

Conference Agreement

The conference agreement for this function reflects total spending of $92.8 billion in budget authority and $90.7 billion in outlays for fiscal year 2005. Mandatory spending for this function is $11.8 billion in budget authority and $10.0 billion in outlays in fiscal year 2005. Discretionary spending for this function is $81.0 billion in budget authority and $80.7 billion in outlays in fiscal year 2005.

The conference agreement provides sufficient funding to accommodate increases consistent with the President's budget for Title I grants to local education agencies and state grants for special education. In addition, the conference agreement recognizes the importance of Pell Grants for low-income undergraduates and will continue to work with the Appropriations Committee and other interested parties to ensure it is a financially sound and robust program.

While the conferees support the Federal student loan programs, the conference is concerned that the Ford Direct Loan Program's subsidy estimates do not reflect the program's true cost to the Federal Government. Therefore the conferees support the Department of Education's continuing efforts to refine and improve its cost estimating techniques.

The conference agreement assumes additional funding for the Workforce Investment Act (this could accommodate additional funding for WIA consistent with the Enzi amendment # 2832.)

Function 550: Health

Function Summary

Function 550 consists of health care services, including Medicaid, the Nation's major program covering medical and long-term care costs for low-income persons; the State Children's Health Insurance Program [SCHIP], health research and training, including the National Institutes of Health [NIH] and substance abuse prevention and treatment; and consumer and occupational health and safety, including the Occupational Safety and Health Administration. Medicaid represents about 72 percent of the spending in this function.

Function 550 budget authority rose from $142.2 billion in 1999 to $241.8 billion in 2004, an 11.2 percent average annual growth rate. During the same time period, outlays rose from $141.1 billion to $239.6 billion, an 11.2 percent average annual growth rate. The largest component of this was the budget of the Medicaid, for which federal payments grew from $108.0 billion in 1999 to $173.9 billion in fiscal year 2004, a 10 percent average annual increase.

Senate Resolution

Discretionary

The Senate resolution assumes discretionary spending in this function of 55.1 billion in budget authority and $50.4 billion in outlays for 2005. The resolution includes the following specific assumptions:

The Omnibus Appropriations Bill of 2003 completed the planned five-year doubling of the NIH budget from $13.7 billion in 1998 to $27.2 billion in 2003. The Senate resolution includes an additional increase in 2005, bringing the total NIH funding to $28.7 billion. As part of this, the resolution assumes $1.7 billion for NIH biodefense efforts, an increase of 7.5 percent over 2004.

The resolution also assumes a $35 million increase in food safety and inspections at USDA. These funds will help USDA detect and prevent BSE (mad cow disease) as well as help detect bioterrrorism.

The resolution also includes two one-year changes in Medicaid to offset 2005 discretionary spending. The first is a reduction in the federal medical assistance percentage [FMAP] for information systems from a 90 percent to 75 percent federal share. The second is a reduction in federal reimbursement for the administrative costs of Medicaid to reflect the share assumed in the Temporary Assistance for Needy Families [TANF] block grant and prohibit states from using TANF funds to pay those costs in 2005.

The Senate adopted an amendment (SA 2780) by Senator Clinton creating a deficit-neutral reserve fund for appropriations addressing minority health disparities.

The Senate adopted an amendment (SA 2741) by Senator Specter to increase the level in this function by $1.3 billion in budget authority in 2005 for the National Institutes of Health. The amendment included a corresponding negative entry for function 920 to result in no net effect on the overall budget.

The Senate adopted an amendment (SA 2822) by Senator Murkowski to increase the level in this function by $282 million in budget authority in 2005 for Indian Health Services. The amendment included a corresponding negative entry for function 920 to result in no net effect on the overall budget.

The Senate adopted an amendment (SA 2794) by Senator Thomas to increase the level in this function by $100 million in budget authority in 2005 for rural health programs. The amendment included a corresponding negative entry for function 920 to result in no net effect on the overall budget.

Mandatory

The Senate-passed resolution provides for a one-year extension of the QI-1 program, under which Medicaid pays the Medicare Part B premium for low-income beneficiaries.

The Senate recognizes that the Temporary Assistance for Needy Families [TANF] reauthorization is likely this year, and that the reauthorization will be paid for with spending reductions and not increase the deficit.

The Senate also notes that there is great potential for savings in the Medicaid program due to waste and abuse in the system. The Senate points out that many states are using Medicaid funds to provide health care to low-income individuals and understands the need to balance all issues when addressing this issue.

The resolution also includes a deficit-neutral reserve fund for legislation that addresses access to health-care services and health insurance for the uninsured. This reserve fund allows the chairman of the Budget Committee to adjust applicable allocations and aggregates to accommodate this legislation if the Committee on Finance or the Committee on Health, Education, Labor, and Pensions reports a bill that provides health insurance for the uninsured or that increases access to health insurance through lowering costs-provided that any such measure does not increase the costs of current health coverage.

The Senate understands that protecting patients' access to quality and affordable health care by reducing the effects of excessive liability costs is important to improve access to health-care providers and reduce health-care costs. The Senate encourages the committees of jurisdiction to examine such concepts as sensible limits on non-economic damages and reserving punitive damages for case that justify them.

Public and private health plans and employers pay the medical expenses of insured individuals when they are injured by a third party, but in these circumstances public and private health plans and employers are entitled under federal law to be repaid if the individual later recovers damages from the third party causing the injury. The right of recovery is an important means to restore federal revenue, to contain private health plan and employer costs and to reduce health care premiums for individuals. The Senate understands the recovery rights of federal health programs (Medicare, FEHPB and M+C) and private health plans have been eroded by recent court decisions. The result is higher federal and private health plan costs. Last year, Congress acted to shore up the Medicare program's recovery right. The Senate encourages the committees of jurisdiction to examine proposals that will strengthen the right of recovery for federal programs and private health plans and employers.

The Senate adopted an amendment (SA 2699) by Senator Kennedy that allows legislation that maintained expiring SCHIP funds to be included in the reserve fund for the uninsured.

The Senate adopted an amendment (SA 2833) by Senator Bingaman that establishes a deficit-neutral reserve fund for legislation reforming the vaccines for children program.

House Amendment

The House amendment calls for $245.1 billion in budget authority and $244.9 billion in outlays in fiscal year 2005. The function totals are $1.353 trillion in budget authority and $1.350 trillion in outlays over 5 years. Mandatory spending is $198.8 billion in budget authority and $198.9 billion in outlays in fiscal year 2005, and totals $1.119 trillion in budget authority and $1.120 trillion in outlays over 5 years. Discretionary spending is $46.3 billion in budget authority and $46.1 billion in outlays in fiscal year 2005; and over 5 years, it is $233.9 billion in budget authority and $230.4 billion in outlays.

Mandatory

The assumptions accommodate H.R. 4, the Personal Responsibility, Work, and Family Promotion Act of 2003, which passed the House on 13 February 2003, and is awaiting action in the Senate. The assumption is necessary to allow for a potential conference agreement. The assumption is reflected in the allocation to the Committee on Energy and Commerce.

Discretionary

The Committee on Appropriations will determine how funds will be apportioned among the various discretionary programs. Specific programs will be increased or decreased when the Appropriations subcommittees write their respective bills. Outyear levels are not binding and will be revisited in subsequent years.

Reserve Fund

The House amendment provides a reserve fund to reflect the savings from legislation that has passed the House of Representatives and is pending in the Senate "that provides for the safe importation of FDA-approved prescription drugs or places limits on medical malpractice litigation." This reserve fund affects Function 570 as well as Function 550.

The adjustment will be made by the chairman of the Committee on the Budget to the allocations and aggregates to reflect any resulting savings from any such measure. The effect of any adjustment would be to lock in the savings for deficit reduction. The chairman of the Budget Committee will consult with the committees of jurisdiction before making any adjustments pursuant to this section.

The House amendment also provides a deficit-neutral reserve fund for the period of fiscal years 2005-2009 for legislation that addresses access to health care services and health insurance for the uninsured. The reserve fund is needed to allow an initiative for the uninsured to come to the floor as long as it is deficit neutral in the first year and over the 5-year period.

The House amendment also provides a reserve fund for the Family Opportunity Act. If legislation is reported by the Energy and Commerce Committee that provides Medicaid coverage for children with special needs (the Family Opportunity Act), the chairman of the Budget Committee may adjust the levels in the allocations and aggregates to the extent such legislation is deficit neutral in fiscal year 2005, and the period of fiscal years 2005-2009. The reserve fund would allow these initiatives to come to the floor with offsets, as long as that initiative is deficit neutral in the first year and over the 5-year period.

Conference Agreement

The conference agreement for this function reflects total spending of $252.4 billion in budget authority and $250.0 billion in outlays for fiscal year 2005. Mandatory spending for this function is $199.1 billion in budget authority and $199.2 billion in outlays in fiscal year 2005. Discretionary spending for this function is $53.3 billion in budget authority and $50.8 billion in outlays in fiscal year 2005.

The conference agreement can accommodate a 1-year extension of the QI-1 program. It also includes a deficit-neutral reserve fund for the enactment of the Family Opportunity Act for both the House and the Senate. Finally, the agreement recognizes the importance of addressing the problem of the uninsured and includes two separate reserve funds, one for the House and one for the Senate.

Function 570: Medicare

Function Summary
Function 570 reflects the Medicare Part A Hospital Insurance [HI] Program, Part B Supplementary Medical Insurance [SMI] Program, and premiums paid by qualified aged and disabled beneficiaries. In addition, with the enactment of H.R. 1 last year, the Medicare Advantage Program replaced Medicare+Choice under Part C and a new Voluntary Prescription Drug Benefit Program was established under Part D of Medicare. Prior to implementation of the new drug benefit in 2006, certain low-income seniors will be eligible for transitional low-income drug assistance of up to $600 in conjunction with their prescription drug discount card.

Function 570 budget authority rose from $190.6 billion in 1999 to $269.6 billion in 2004, a 7.2 percent average annual growth rate. During the same time period, outlays rose from $190.4 billion to $268.8 billion, a 7.1 percent average annual growth rate. This function consists entirely of the Medicare program.

Senate Resolution

Discretionary

The Senate resolution assumes discretionary spending in this function of $3.7 billion in budget authority and $3.7 billion in outlays for 2005. This represents a decrease of $0.2 billion in budget authority and $0.1 billion in outlays from the 2004 level. The resolution includes the following specific assumptions:

The resolution assumes three relatively minor changes proposed by the President to offset discretionary spending. These are user fees relating to claims, a change to the Medicare secondary payer [MSP], and a change in durable medical equipment. These proposals would save approximately $1 billion over the next five years.

The Senate resolution recognizes the importance of the proper and timely implementation of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, P.L. 108-173 and assumes increased funding for administering this new program in 2005 and beyond.

The Senate resolution also recognizes the importance of the administrative funding for the Social Security Administration included in this function, and assumes the increased funding proposed by the President.

House Amendment

The House amendment calls for $288.2 billion in budget authority and $289.1 billion in outlays in fiscal year 2005. The function totals are $1.776 trillion in budget authority and $1.776 trillion in outlays over 5 years. Mandatory spending is $284.0 billion in budget authority and $285.1 billion in outlays in fiscal year 2005, and totals $1.755 trillion in budget authority and $1.756 trillion in outlays over 5 years. Discretionary spending is $4.1 billion in budget authority and $4.0 billion in outlays in fiscal year 2005; and over 5 years, it is $20.9 billion in budget authority and $20.7 billion in outlays.

Mandatory
The House amendment assumes growth in mandatory spending to accommodate projected caseloads, inflation, and other normal factors. It also provides for the continuation of the new modernization of Medicare with prescription drug coverage that was enacted by the President and Congress last year. The assumptions appear in the allocations of the respective committees of jurisdiction, which limit the amount that programs can be increased. The authorizing committees are free to determine their own policies, so long as they stay within the allocation limits.

Discretionary

The House amendment gives Function 570 priority status within the overall framework of level funding for fiscal year 2005 in non-defense, non-homeland-security spending. Consequently, the amendment calls for an increase from level funding of $302 million in budget authority and $199 million in outlays. This amount accommodates the President's request for Function 570 discretionary-including the President's $100-million request for additional funds for prescription drug administrative costs-without including any of the President's offsets. Outyear levels are not binding and will be revisited in subsequent years.

Reserve Fund

The House amendment provides a reserve fund to reflect the savings from legislation that has passed the House of Representatives and is pending in the Senate "that provides for the safe importation of FDA-approved prescription drugs or places limits on medical malpractice litigation." This reserve fund affects Function 550 as well as Function 570.

The adjustment will be made by the chairman of the Committee on the Budget to the allocations and aggregates to reflect any resulting savings from any such measure. The effect of any adjustment would be to lock in the savings for deficit reduction. The chairman of the Budget Committee will consult with the committees of jurisdiction before making any adjustments pursuant to this section.

Conference Agreement

The conference agreement for this function reflects total spending of $287.9 billion in budget authority and $289.0 billion in outlays for fiscal year 2005. Mandatory spending for this function is $284.0 billion in budget authority and $285.1 billion in outlays in fiscal year 2005. Discretionary spending for this function is $3.9 billion in budget authority and $3.9 billion in outlays in fiscal year 2005. The conference agreement assumes the QI-1 program will be extended for one year.

Function 600: Income Security

Function Summary

Function 600 includes most of the Federal Government's income support programs. These include: general retirement and disability insurance (excluding Social Security)--mainly through the Pension Benefit Guaranty Corporation-and benefits to railroad retirees. Other components are Federal employee retirement and disability benefits (including military retirees); unemployment compensation; low-income housing assistance, including section 8 housing; food and nutrition assistance, including food stamps and school lunch subsidies; and other income security programs.

This last category includes: Temporary Assistance for Needy Families [TANF]; Supplemental Security Income [SSI]; spending for the refundable portion of the Earned Income Credit [EIC]; and the Low Income Home Energy Assistance Program [LIHEAP]. Agencies involved in these programs include the Departments of Agriculture, Health and Human Services, Housing and Urban Development, the Social Security Administration (for SSI), and the Office of Personnel Management (for Federal retirement benefits).

Function 600 budget authority rose from $243.5 billion in 1999 to $329.3 billion in 2004, a 6.2 percent average annual growth rate. During the same period, outlays rose from $242.4 billion to $336.1 billion, a 6.8 percent average annual growth rate.

Senate Resolution

Discretionary

The Senate resolution assumes discretionary spending in this function of $46.4 billion in budget authority and $51.4 billion in outlays for 2005. This represents an increase of $1.8 billion in budget authority and a decrease of $1.7 billion in outlays from the 2004 level. The Senate resolution includes the following specific assumptions: