Sequestration of federal funds possible in FY 2013

The debt limit deal enacted by Congress on August 2, 2011 calls for about $900 billion in cuts in discretionary programs over the next decade and would impose further automatic, across-the-board spending cuts in many programs if Congress were to fail to enact an additional $1.2 trillion in deficit-reduction measures by January 15, 2012.  These automatic cuts are known as sequestration. Because Congress did not agree on the additional measures, the automatic cuts – the sequestration – are scheduled to go into effect.

Unless Congress acts to repeal the sequestration language, several federal programs will have significant cuts during FY 2013.

What is sequestration?
In current discussion, “sequestration” or “the sequester” are terms used to describe the automatic budget cuts passed into law under the Budget Control Act in August 2011.  The Act contained new agreements on spending levels and the debt ceiling and created a Congressional Debt Supercommittee (formally known as the Joint Congressional Committee on Deficit Reduction).  This Supercommittee, made up of members from the House and Senate on both sides of the aisle, was instructed to cut at least $1.5 trillion from the federal budget.  If the Supercommittee failed to present an agreement containing cuts of at least $1.2 trillion over the next 10 years, the Act would trigger automatic budgetary cuts.

How much money does sequestration cut?
Secretary of Education Arne Duncan has submitted testimony to Congressional committees which assumes approximately 7.8 percent in cuts, per the calculations of the Congressional Budget Office.  The Center for Budget and Policy Priorities has presented a worst-case scenario of 9.1 percent ($4.1 billion) in cuts, assuming that FY 2013 funding levels are the same as FY 2012.

When will sequestration go into effect?
The President is required to issue a sequestration order, which will have immediate effect, no later than January 2, 2013.  This means that sequestration will affect all education programs where funding is made available on or after January 2, 2013 (i.e. funds available to grantees as of July 1, 2013).  Sequestration will also likely affect funding for the five major education programs that receive FY 2012 advance funding: ESEA Title I and II, Impact Aid, IDEA Part B, and career and technical education state grants.  For these programs, the advance appropriation represents 75 percent of the year’s funding, with the other 25 percent coming from regular-year appropriations.

How can sequestration be avoided?
Because sequestration was put into place by an act of Congress, another act of Congress is required to undo the trigger.  This can be an independent item of legislation or a budget bill that explicitly replaces sequestration.

Sequestration timeline

Impact on the School Administrative Units
Federal program staff at the Maine Department of Education are providing school administrative units the full allocation amounts for ESEA Title I and II, IDEA Part B, and the career and technical education grants. However, without the resolution of the sequestration, school administrative units should be cautious in developing budgets that would utilize the full allocation, and they should consider utilizing 75 percent for the necessary services under each of these federal programs and the balance in areas that are not critical and may be impacted by the sequester.

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