The Budget Control Act and “Fiscal Cliff”: Impact on Ending Homelessness

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Federal Policy Brief | July 14, 2012

Files: FisCliff/BCA One-Pager (PDF | 240 KB | 1 page)

The August 2011 Budget Control Act (BCA) and other upcoming budget-related issues have critical implications for efforts to prevent and end homelessness. The BCA makes deep cuts over the next decade to federal “discretionary” spending (which is determined each year through the congressional appropriations process, as opposed to mandatory spending like Medicaid which happens automatically). It includes virtually all affordable housing and targeted homelessness programs within HUD and other federal agencies.

The BCA contains two major provisions to reduce federal debt:

  1. An overall cap on federal discretionary spending, starting in FY 2012. These caps generally keep increases in spending below the expected rate of inflation for the next ten years, meaning Congress will have less to appropriate in today’s dollars than in the previous year.
  2. Deeper spending cuts over nine years, beginning in FY 2013, totaling an additional $1.2 trillion in spending reductions.

Step 2 of the spending cuts is scheduled to begin in January 2013. These cuts will be split evenly between defense and non-defense programs. They will come from some mandatory programs, but most mandatory programs that affect low-income people are exempt, including Medicaid, SSI, Social Security, TANF, and SNAP.  All VA programs are exempt as well. However, HUD programs, as well as Health Care for the Homeless, SAMHSA Homeless Services, and other targeted homelessness programs, are not exempt.

In January 2013, these cuts will be implemented through a “sequester:” an across-the-board cut to all non-exempt programs below the level that Congress appropriates for FY 2013. For FY 2013, non-defense discretionary spending is expected to be cut by about 8.4 percent compared to FY 2012. Congress is currently drafting FY 2013 appropriations bills under the caps set by Step 1 above of the BCA. Then, in January 2013, this across-the-board sequestration will go into effect, resulting in about an 8 percent cut to nonexempt, non-defense discretionary programs, including nearly all affordable housing and homelessness programs. Sequestration will be indiscriminate, cutting high-priority, extremely effective programs (like HUD’s Homeless Assistance Grants) by exactly the same percentage as lower-priority, less efficient programs.

In addition to sequestration, several other budgetary events, including the expiration of both long-term unemployment insurance and the Bush-era tax cuts, are scheduled to hit in early 2013. Together, these events would have a significant impact on efforts to end homelessness by hurting the economy. Economists largely agree that raising taxes and reducing spending by this much in one year would make unemployment substantially worse. Persistent high unemployment has already sent millions of people to shelters, and further unemployment would hit homeless assistance systems hard.

Recommendation
Congress has the authority to reverse, suspend, or alter the BCA and these other budgetary events in any way it sees fit.  In order to ensure support for efforts to prevent and end homelessness, Congress should:

  • Protect the economy, especially employment at the low end of the job market. With the Homelessness Prevention and Rapid Re-Housing Program expiring, the fight to end homelessness will be much harder if joblessness worsens.
  • Protect the poorest Americans. Many of the primary antipoverty programs are exempt from sequestration, with affordable housing and homelessness programs a notable and unfortunate exception.
  • Avoid further cuts to non-defense discretionary spending, including affordable housing and homeless assistance programs.
  • Prioritize what works. Across-the-board cuts do not represent well-thought-out policymaking. Congress must assess which programs have strong outcomes and protect investments in those programs.