Fiscal cliff agreement has been reached.

January 03, 2013

On December 31, Senate leaders and the White House arrived at an agreement to avert the fiscal cliff. The American Taxpayer Relief Act (H.R. 8) passed the Senate 89-8 and the House 257-157, and is now awaiting President Obama’s signature.

H.R. 8 primarily addresses tax rates, deductions and credits, and extends authorization for certain existing federal programs. The White House has a full summary of what was included in the agreement. H.R. 8 also addresses several issues that would directly impact workforce development programs.

H.R. 8 delays the sequesters—which were scheduled to go into effect on January 2—until March 1, 2013, giving Congress and the Administration additional time to consider a permanent alternative. H.R. 8 delayed the sequesters by coming up with $24 billion in other deficit reduction measures, essentially stopping the trigger for the sequester. The $24 billion reduction will be paid for with 50 percent spending cuts and 50 percent revenues, and the spending cuts will be achieved by reducing the discretionary spending caps by $12 billion over 2 years—divided equally between defense and non-defense discretionary (NDD). Because H.R. 8 already cut spending by $24 billion, if the sequesters go into effect in two months the total cut for FY '13 will be $85.33 billion, down from $109 billion. It is unclear at this time how lower spending caps will affect funding for workforce development programs in FY '13 and FY '14.

Sequestration is now set to coincide with the United States hitting the debt ceiling in early March. A sequestration-debt ceiling deal has the potential to be even more harmful NDD programs than sequestration itself. House Republicans, many of whom were unsatisfied with the fiscal cliff agreement, are likely to push for deeper cuts to NDD programs in exchange for a vote to raise the debt ceiling. Congress will also need to deal with funding for the remainder of FY '13 as the current continuing resolution (CR) expires at the end of March, as well as begin the FY '14 budget process. All of this means that it will almost certainly be a contentious debate and funding for NDD programs—including workforce development—will continue to face significant threats. Policymakers will begin positioning themselves around this issue over the next few weeks, and we should soon have a better sense of how the debate will play out.

Other Provisions

Importantly, H.R. 8 also extends unemployment insurance (UI) benefits through 2013. Without an extension, 2.2 million families would have lost access to UI benefits on January 1. National Skills Coalition strongly supported a long-term extension of UI benefits and is pleased workers and their families will continue to have the financial assistance they need during periods of unemployment. 

The fiscal cliff deal also extends the Farm Bill, which authorizes the Supplemental Nutrition Assistance Program Employment & Training (SNAP E&T, formerly Food Stamps Employment & Training or FSET) program, through the end of the fiscal year. SNAP E&T was previously funded by the continuing resolution (CR), which expires in March. Under H.R. 8, SNAP E&T “100 percent funds” will be funded at the 2012 level of $79 million, which is $11 million lower than the amount allocated in the Senate-passed version of the Farm Bill, but level with the funding allocated in the House version of the bill.

NSC will continue to monitor sequestration talks and weigh in with policymakers as necessary. Follow us on Twitter or like us on Facebook for up-to-the-minute updates.