KY Policy Blog

5 Things Kentuckians Need to Know About Federal Budgets Being Voted on This Week

By Ashley Spalding
October 3, 2017

This week both the U.S. House and Senate are expected to vote on budget proposals that would have a devastating impact on Kentuckians. The full House will be voting on its budget resolution, which passed committee in July. The Senate will be “marking up” its recently released budget as well, a process of considering the plan in committee with the opportunity to make changes before the committee votes. In both budgets, critical investments in our state are at risk — and with Kentucky more heavily reliant on federal spending than most states, these proposals would be especially harmful to Kentuckians. Here are five things to be concerned about:

Proposals cut non-defense discretionary programs that help Kentucky families make ends meet and move ahead

Non-defense discretionary (NDD) programs fund investments that range widely, including elementary and secondary education, the Community and Mental Health Services block grant, the Centers for Disease Control and Prevention, job training and employment, rental assistance, child care and water infrastructure. The proposed cuts in both budgets would therefore harm our state’s ability to improve education, support children and families, make our communities safer and healthier and develop the workforce and economy.

In the House budget, proposed cuts to NDD programs of $1.3 trillion from by 2027 would make appropriations 17 percent below the 2010 level after adjusting for inflation — and 22 percent below once population growth is taken into account. Overall funding for this part of the budget has already fallen significantly since 2010 because of the Budget Control Act’s caps on discretionary programs and sequestration cuts. NDD funding would be 44 percent below its 2010 level by 2027 with the cuts in this budget proposal, after adjusting for inflation.

The Senate budget resolution would cut NDD funding by $632 billion between 2019 and 2027.

Food assistance, Medicaid and other important entitlement programs at risk for deep cuts

Families and individuals who are eligible based on their income for entitlement programs receive assistance meeting basic needs. The House budget resolution proposes $4.4 trillion in cuts to these key federal investments that help Kentucky families, including:

  • The Supplemental Nutrition Assistance Program (SNAP), formerly known as “food stamps,” that helps 651,889 low-income Kentuckians afford basic nutrition. SNAP would be cut by at least $150 billion over the decade, more than 20 percent of the SNAP budget.
  • Medicaid, which currently provides health coverage for one in four Kentuckians, would be cut by $1.5 trillion over the next ten years (details in the following section).
  • Pell Grants would be cut by $75 billion over the next decade. Pell helps expand college access and opportunity to people who would otherwise be priced out of higher education. Last year 102,360 Kentucky students received a Pell grant. Under this proposal, the maximum grant would be cut by $1,060 or 18 percent, even while the purchasing power of Pell has already declined significantly in recent years as the costs of college have risen. Kentucky’s postsecondary institutions received $373,576,000 from Pell in 2016-2017.
  • Other programs at risk for cuts in the House budget include Social Security Insurance (SSI), Temporary Assistance for Needy Families (TANF), the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC).

The Senate budget proposes to cut entitlement programs by at least $4 trillion over the coming decade. Although few details about these cuts are in the current version of the proposal, cuts to food assistance, health care, tax credits for low-income families and other essential supports would be unavoidable under such a deep funding cut.

Health care for Kentuckians threatened in both budgets

The budget proposal currently slated for a floor vote this week in the House includes cuts to health care that takes several forms. Perhaps most harmful are changes to the financial structure of Medicaid that result in permanent and annual cuts to the program, which would occur under what is known as a block grant or a per capita cap. Both of these policies limit how much a state receives for its Medicaid program, and then annually increases that amount more slowly than growth in the cost of medical care. The end result is a state’s medical bills would outpace the funds available to pay for them, leading to fewer people covered, fewer health services offered or even smaller payments to health care providers.

The House budget proposal also assumes passage of the American Health Care Act, the initial attempt to make deep cuts to low-income health care coverage. It is unclear at this point whether those changes still apply as Congress missed the deadline to pass that legislation.

The Senate proposal is much less clear in the ways it would affect health care coverage. Much of that plan is designed to make huge tax cuts that increase the deficit and rely on big spending cuts to Medicaid, Medicare and other programs that fall under the purview of the Senate Finance Committee. Additionally, the Senate plan calls for $4 trillion in cuts to entitlement programs, like Medicaid and Medicare, over the next decade. The Senate budget also leaves the door open for future attempts at repealing the ACA, which the Congressional Budget Office estimates would lead to anywhere between 15 and 32 million fewer people covered nationally, depending on which legislation is used.

Kentucky benefits greatly from federal health care programs. Over 1.4 million Kentuckians access Medicaid coverage to get care when they need it, and an additional 862,900 Kentuckians are covered by Medicare. Cuts to these programs would almost certainly lead to an increase in our uninsured and hit local economies that benefit from health care spending.

Both budget plans fund tax cuts for the wealthy

Both budget proposals are structured in a “Robin-Hood-in-reverse” way that uses program cuts described above – which would deeply impact low and middle income Americans – to pay for huge tax cuts for the wealthiest Americans.

The House plan calls for a number of major tax cuts for the wealthy and corporations that would cost trillions of dollars over the next 10 years. It would:

  • Lower and consolidate individual tax rates.
  • Repeal the Alternative Minimum Tax which ensures wealthy people who can claim many exemptions and deductions pay at least a minimum level of taxes.
  • Cut corporate tax rates and set a special, lower rate for “pass-through” business income that would allow some high-income individuals and corporations to pay taxes on their business income at a very low rate.
  • Eliminate corporate taxation of profits earned outside of the U.S.
  • Approve provisions in the House-passed American Health Care Act that would eliminate taxes on the wealthy and corporations that helped pay for improvements in health care under the ACA.

A tax plan released alongside the Senate budget resolution last week calls for a total of $2.4 trillion in tax cuts over the next 10 years. It is comprised of big breaks for the wealthy and corporations similar to those in the House budget but would also repeal the estate tax on the wealthiest heirs in America, double the standard deduction and clean up some unspecified deductions, though not the mortgage interest and charitable deductions which are especially skewed to the wealthy. To “pay for” these tax cuts – 80 percent of which would go to the wealthiest 1 percent of Americans by 2027 – the Senate budget plan would allow the deficit to increase by $1.5 trillion by 2027 and cut programs under the Senate Finance Committee’s jurisdiction such as Medicaid, Medicare, SSI, the Child Care and Development Block Grant, Independent Living and many other vital programs.

Budgets use reconciliation process to fast-track cuts

Both budget plans use the fast-track process of budget reconciliation to immediately move forward some of these cuts. Through reconciliation, Congress is able to pass cuts — including tax cuts — with only a simple majority in the Senate (i.e., without any Democratic votes) using the same process that has been used recently to try to repeal and replace the ACA.

The programs at risk for $203 million in fast-track cuts in the House Budget include SNAP, Medicaid, SSI, Pell, and the EITC and CTC — programs provide important assistance to Kentuckians across the state. These cuts would pave the way for large-scale tax legislation that features substantial tax cuts.

The Senate plan would fast-track the $1.5 trillion in deficit-growing tax cuts described above, plus more as long as they are offset by slashing public investments.

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