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Federal Grants Management Training May 6, 2013 Renaissance Downtown Phoenix, AZ

Federal Grants Management Training May 6, 2013 Renaissance Downtown Phoenix, AZ. Presented by Michael Brustein, Esq. Brustein & Manasevit, PLLC mbrustein@bruman.com www.bruman.com. Agenda. The State of Congress Fiscal and Budgetary Developments (Sequestration)

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Federal Grants Management Training May 6, 2013 Renaissance Downtown Phoenix, AZ

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  1. Federal Grants Management TrainingMay 6, 2013Renaissance DowntownPhoenix, AZ Presented by Michael Brustein, Esq. Brustein & Manasevit, PLLC mbrustein@bruman.com www.bruman.com

  2. Agenda The State of Congress Fiscal and Budgetary Developments (Sequestration) The State of the Federal Role in Education A Test on Federal Grants Management EDGAR and OMB Tutorial Questions

  3. The State of Congress

  4. Congressional Productivity The 112th Congress was the least productive since analysts started keeping track Clinton impeachment 112th: 283 Public laws passed

  5. Congressional Productivity • Lack of Productivity is a result of: • Gridlock in legislative process • Divides between parties and within parties • Divided Congress, continued influence of “Tea Party” • Significant focus on “must-pass” legislation in contentious policy areas like federal spending • 113th Congress not doing much better

  6. Congressional Popularity > Source: PPP poll January 2013

  7. Congressional Popularity • Root Canals • Lice • Colonoscopies > Source: PPP poll January 2013

  8. The Good News > Source: PPP poll January 2013

  9. Retirements and Turnover • Significant numbers of Representatives and Senators have retired or announced pending retirement in recent years. • Most cite age, but also driven out by gridlock, partisan politics, etc. • Voter dissatisfaction means greater electoral turnover in Congress • Lucrative post-Congressional job opportunities add incentive to retire at younger age

  10. Largest Turnover Since 1970’s • Current announced retirements, plus defeats in last election, means largest turnover in Congress since 1970’s • Especially pronounced in Senate • Expect continued turnover in next few years

  11. The State of Congress • Overall: • Continued partisanship • Significant turnover on education-relevant Committees and Committee leadership • Loss of institutional knowledge/relationships • Focus on fiscal policy above all else

  12. Fiscal and Budgetary News Sequestration The Fiscal Cliff Deal FY 2013 Appropriations How Cuts Will be Implemented FY 2014 and Beyond

  13. Sequestration • Also known as “the sequester” • A series of automatic, across-the-board budget cuts • Amount and type of cuts depends on category of spending • Following procedures laid out in 1985 law

  14. Where does sequestration come from? • Budget Control Act of 2011 • Set deficit reduction targets • Created Congressional debt “supercommittee” • If supercommittee failed to come up with a deficit reduction plan meeting targets, automatic cuts triggered • Sequestration as failsafe/threat  not really meant to go into practice • Because supercommittee did not come up with a plan, sequestration is triggered • American Taxpayer Relief Act • Also known as the fiscal cliff deal • Modified sequestration amounts, timing

  15. How does sequestration work?* • Triggers procedure set out in Balanced Budget and Deficit Control Act of 1985 • Congress identifies total amount to be cut and time period over which cuts occur • Cuts are divided evenly by year • Cuts are split between defense and non-defense spending • Exempt programs (outlined in law) are removed from equation • All other programs see equal, across-the-board cuts in first year (in this case, modified procedure for subsequent years) • General procedure is subject to modification by Congress

  16. The Fiscal Cliff Deal • In the days leading up to the end of 2012, fiscal picture looked dire • Temporary (“Bush-era”) tax cuts set to expire • Sequestration set to go into effect January 2nd • Concerns about how sequestration, increase in tax rates would affect economy • No alternatives in place

  17. The Fiscal Cliff Deal • Congress passed comprehensive spending/tax package known as “American Taxpayer Relief Act” early on New Year’s Day • Extended most of the Bush-era “middle-class” tax cuts (though not payroll tax cuts) • Raised marginal income tax rates on those with incomes above $400,000 for individuals ($450,000 for couples) • Made changes to implementation date of sequestration and total cut amount

  18. Changes to Sequester • Delays start by two months (was January 2; now March 1, 2013) • Reduces FY 2013 cut by $24 billion to compensate for shorter time period • Offsets reduction in cuts with: • $12 billion in new taxes to IRAs that are converted from traditional to Roth plans • $12 billion in cuts to annual spending caps • Split evenly between Defense and non-defense • Cut now at 5% of FY 2013 funding • Sequestration still applies for remainder of FY 2013 and for FY 2014 through FY 2021

  19. Vanishing Sequestration Cuts • Fiscal cliff deal creates $24 billion in offsets to pay for delay • Half will come from spending cuts ($12 billion) • Split evenly between defense and non-defense discretionary (“NDD”) funding (includes education) ($6 billion each) • One-third of cuts to be applied in FY 2013, remaining two thirds in FY 2014) •  $2 billion in NDD cuts for FY 2013

  20. Vanishing Sequestration Cuts • Fiscal cliff deal spending cuts will be applied through reductions in Congressional spending caps • Cuts to caps =/= cuts to funding • These cuts are in addition to any across-the-board cuts from sequestration • Due to differences between spending and caps, little anticipated effect this year • Takes originally estimated 8.2% cuts down to 5%

  21. Two major factors in determining federal funding under sequestration: • Congressional spending caps • Regular-year federal appropriations

  22. Regular-YearAppropriations • Still important!!! • For FY 2013, sequestration cuts represent reductions below the “budget baseline” (current federal spending levels) • Funding for FY 2013 set by two continuing resolutions (CRs) (temporary budget measures) • Second FY 2013 CR set funding at FY 2012 levels, with some exceptions • E.g. Head Start (additional $33.5 million) • For FY 2014 and beyond, cuts are incorporated into funding levels through regular appropriations process

  23. How Sequestration Cuts are Calculated • Adjust total cut for interest to reflect lesser debt principal • $1.2 trillion  $984 billion • Divide by year from FY 2013 through FY 2021  $109.3 billion • Reduce FY 2013 cuts by $24 billion, to $85.3 billion* • Split function between defense and non-defense spending (about $42.7 billion each in FY 2013, $54.5 billion each per subsequent year) • Take exempt programs out of the equation • Spread cuts equally among remaining programs in FY 2013 • Cut is taken at federal “program, project, or activity” level • Sequestration cut will be 5% of FY 2013 funding* (*change due to fiscal cliff deal)

  24. The Impact of Sequestration (after the fiscal cliff deal)

  25. How Cuts will be Implemented • All funds allocated October 2012 and later are subject to cuts starting March 1 • Single allocation or monthly programs affected starting with first allocation after sequester date (e.g. April 1) • For competitive grants, funds previously awarded will remain unaffected(even for multi-year/continuation grants) • Cuts will be implemented in next competition • For bifurcated funding programs*: • Advance funding received in October of 2012 did not see cuts when allocated • BUT cuts will be calculated and total FY 2013 cut deducted from July 2013 allocation *Per a July 2012 memorandum, confirmed in February 26 conference call.

  26. FY 2013 Funding Under Sequestration In programs with bifurcated funding, grantees usually receive about 75% of program funds in October, and the remaining 25% the following July. Though sequestration cuts represent approximately 5% of year’s allocation, that entire amount will be taken out of July 2013 funds.

  27. Sample Sequestration Cut • Assume the (fictional) “School is Cool” (SIC) grant program provides $100,000 per year to your State • As with most bifurcated funding programs, 75% of SIC funds ($75,000) are distributed to States in October, with the remaining 25% ($25,000) available in July • Under sequestration, ED* provided the full funding amount in October of 2012. However, it will calculate a cut for the full fiscal year (approximately 5%, or $5,000) and will apply that full year’s cut against July 2013 funds. *Per a July 2012 memorandum, confirmed in February 26 conference call.

  28. Sample Sequestration Cut – FY 2013 • Your State received its regular SIC appropriation ($75,000) on October 1, 2012. • The full-year sequestration cut of $5,000 will be taken out of July 2013 funding • So the SIC funds sent out on July 1, 2013 will be $20,000 ($25,000 - $5,000) *Per a July 2012 memorandum, confirmed in February 26 conference call.

  29. NOTE: Actual allocations may shift by more or less than 5% • Because of variations in census data, poverty data, and per pupil expenditures, FY 2013 allocations under Title I and other formula programs will be different from FY 2012 • In addition, ED will not reduce small or shrinking districts below hold-harmless amount, leaving other district to share that cut • Result: actual cuts from 2012 to 2013 at district level can range from 0% to approximately 10%

  30. NOTE: Second CR Means Additional Across-the-board Cut • Second FY 2013 CR contains provision that triggers automatic cuts if appropriations were above spending caps • OMB says this has occurred • Will mean 0.2% across-the-board cut in addition to sequestration in FY 2013 • Unclear at this point how this cut will be implemented, but likely through sequester process

  31. Sequestration in 2014 and Beyond • For FY 2014 through 2021, cuts are applied through reductions in annual spending caps as part of regular Congressional appropriations process • Cuts will be applied to both allocations for bifurcated programs (October and July) • Total cut is estimated at 8.2% of non-defense discretionary spending • But actual cut for each program depends on appropriation bills

  32. Sample Sequestration Cut – FY 2014 • For FY 2014 and beyond, sequestration cuts (and cuts from the fiscal cliff deal) are taken out of 302(b) appropriations caps • Sequestration will not be applied as a percentage cut • Appropriators have discretion in distributing spending/cuts • So 75% of SIC funds will be sent out in October, and 25% in July • The only variable here is total program funding – the size of the pie.

  33. Sequestration in 2014 and Beyond • Reductions in caps give appropriators more discretion in choosing where to spend or trim (as opposed to automatic cuts) • Can preserve some programs entirely • Expect preservation, in large part, of Title I, IDEA funds • Can “zero out” programs entirely • Can be unpredictable • In years where budget set late, funding is up in the air

  34. The FY 2014 Double Whammy? • States and school districts generally structure budget cycles differently from the federal government • For federal government, FY13 funding = October 2012 + July 2013 allocations • For States/districts, SY 2013-14 = July 2013 + October 2013 • Assuming FY 2014 program funds are cut, SY 2013-14 will see a double reduction: • July 2013 funding will be cut proportionate to full FY 2013 • October 2013 funding will be cut by up to 8.2%, depending on Congressional appropriations

  35. FY 2014 Appropriations Progress • Both House and Senate have passed non-binding budget resolutions • House: cut $5.7 trillion over next decade • Senate: cut $975 billion in spending over next decade, matched with $975 billion in new revenues • President released annual budget proposal April 10th • Both chambers determined to get budget done on time

  36. The State of the Federal Role in Education

  37. 1960s: Congress began recognizing unmet educational needs • Children in Poverty • Students with Disabilities • Vocational Training • Limited English Proficient Students • Homeless Students

  38. Federal education programs • Designed to address specific unmet needs

  39. Limited Federal Capacity • State administered programs created

  40. Department of Health Education and Welfare • Education responsibility generally given to the U.S. Department of Health, Education, and Welfare (HEW) • United States Office of Education • Divided into program bureaus with specific responsibility • Elementary and Secondary Education • Vocational Education • Special Education, etc.

  41. Office of Education • Bureaus: Responsibility for individual program • Individual programs contained separate administrative rules • Not always consistent • Burdensome due to differing requirements

  42. U.S. Department of Education (ED) in 1980 • Education responsibility transferred • HEW becomes ED and Health & Human Services (HHS)

  43. ED • Separation of program function is preserved • Funds allocated to States for program administration • Funds allocated to States for distribution to school districts – local education agencies (LEAs)

  44. State Education Agencies (SEAs) • SEAs expanded • Significant function: Administer federal programs • Divided into program offices • Generally reflect federal organization • Examples • Elementary and Secondary • Students with Disabilities • Career Education

  45. Federal Government recognizes inefficiency! • Programs with separate administrative requirements • Duplication of efforts • Inconsistent requirements • Changes need to be program by program • Leads to administrative standardization

  46. Administrative Standardization • General Education Provisions Act (GEPA) • Education Department General Administrative Regulations (EDGAR) • Single Audit Act • Office of Management and Budget (OMB) Circulars

  47. GEPA • Part of the organic law establishing ED’s structure • Cross-cutting provisions

  48. EDGAR • Department of Education administrative rules covering all ED programs

  49. Single Audit Act OMB Circular A-133 • Standardized audit requirements for all entities expending > $500,000 federal $ annually

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