Washington Report Headlines
· USDA Aiming for More Effective Oversight
· President’s FY 15 Agriculture Budget Request
Federal Employee News
· More Jobs Added Than Projected in Feb
News from the Halls of Congress
USDA Aiming for More Effective Oversight
The U.S. Department of Agriculture's Office of Inspector General is using an increase in funding provided in fiscal year 2014 to provide more effective oversight of USDA programs, and a proposed modest increase in funding for FY 2015 will allow the office to continue that trend. The USDA's budget request seeks $97 million in funding, up from $90 million in FY 2014. The OIG plans to focus its resources on programs including fraud and abuse within the Supplemental Nutrition Assistance Program (SNAP) and crop insurance administration, as well as improving the use of information technology.
SNAP, with an $86 billion budget last year, accounts for 56 percent of the USDA's portfolio, and the OIG devoted more than half of its investigative resources to the program. Efforts included recommendations for USDA to improve screening of retailers participating in SNAP, as well as an initiative to address SNAP fraud on a multi-agency level with state and local authorities.
Budget constraints are resulting in tough choices for program managers as they seek to deliver benefits to those who need them. Over the past eight years, the department has averaged a $12 return for every $1 invested in the OIG's operations. In all, the USDA has requested $23.7 billion in discretionary spending for fiscal 2015, $938 million less than the department's FY 2014 enacted levels.
President’s FY15 Agriculture Budget Request
President Barack Obama requested a $22.2 billion discretionary budget for the Department of Agriculture, about $1.9 billion less than the fiscal 2014 enacted amount of $24.1 billion. The president's request would also provide $1 billion for emergency wildfire suppression and $295 million from his new Opportunity, Growth and Security Initiative.
More than 80 percent of the Agriculture Department's funding comes from mandatory spending for programs such as nutrition assistance, commodity support and crop insurance. Funding for mandatory programs in fiscal 2015 is estimated at $123 billion, an $11 billion decrease from fiscal 2014.
» Farm bill: The five-year farm bill reauthorization (Public Law 113-79) enacted changes to major farm support programs, leaving the president's budget proposal to highlight other programs such as wildfire suppression, agricultural research and rural renewable energy. However, the budget request proposes a substantial decrease in direct spending--about $14 billion over 10 years--for the federal crop insurance program by reducing subsidies to farmers and insurance companies to help finance an additional $56 billion in spending for the Opportunity, Growth and Security Initiative. The farm bill, by contrast, expanded the crop insurance program by $5.7 billion over 10 years.
» Nutrition: A $4.6 billion decrease in mandatory spending on the Supplemental Nutrition Assistance Program, also known as food stamps, is largely consistent with eligibility changes enacted in the farm bill that reduced spending on the program.
The proposal seeks $6.8 billion, $100 million more than provided this year, for the Women, Infants and Children nutrition program, which is the department's largest discretionary program. The request also supports changing the types of food eligible under WIC to focus on nutritious foods, which could affect producers, processors and grocers.
» More money: The president's request would exceed the discretionary budget caps for agriculture spending through the Opportunity, Growth and Security Initiative and by increasing caps for emergency fire activity. The former program would provide $295 million to support in-house research, competitive land-grant programs and a new biosafety research lab. The latter asks for an increased reserve fund to address firefighting in emergency situations.
» Food aid: The fiscal 2015 budget proposes less extensive changes to food aid than the fiscal 2014 request, which focused on local procurement instead of shipping U.S. products overseas, and moving funding to the U.S. Agency for International Development, which administers the program. USDA could instead spend as much as 25 percent of the budget authority for Food for Peace, the largest of the food aid programs, for local procurement during emergencies.
» User fees: $52 million in revenue over 10 years from new user fees for three inspection agencies will be submitted as new legislative proposals: the Animal and Plant Health Inspection Service, the Food Safety and Inspection Service, and the Grain Inspection, Packers and Stockyards Administration.
Federal Employee News
More Jobs Added Than Projected in Feb
Employers added more workers than projected in February, indicating the U.S. economy is starting to shake off the effects of the severe winter weather that slowed growth at the start of 2014.
The 175,000 gain in employment followed a 129,000 increase the prior month that was bigger than initially estimated, Labor Department figures showed today in Washington. The jobless rate rose to 6.7 percent from 6.6 percent as the number of people joining the workforce swamped the quantity of jobs available.
The pickup following the weakest two-month hiring gain in more than a year shows employers remain confident the economic expansion will recover after winter storms slowed consumer spending. Yields on Treasury securities jumped as the report probably also means Federal Reserve policy makers will continue to trim monthly bond purchases aimed at spurring growth.
The weather was less of a detriment overseas. German industrial output rose in January for a third consecutive month as mild temperatures boosted construction activity, another report today showed. While the increase in the jobless rate put the figure further away from the Fed’s threshold of 6.5 percent for raising interest rates, the central bank still faces a challenge in communicating its intentions to investors. Labor-market improvement is one reason why policy makers have dialed back monthly bond buying by $10 billion at each of their past two meetings.
Hiring at professional and business services increased by the most in a year, while payrolls rebounded in education and health services. State and local government agencies, factories and construction firms also added to headcounts last month. The bad weather probably had the biggest impact on the length of the workweek last month. The number of hours worked by all employees dropped to 34.2 on average in February, the least since January 2011. The Labor Department’s survey of households, from which the unemployment rate is calculated, showed almost 6.9 million people worked less than a full week, the most for any February since record-keeping began in 1978. 601,000 Americans weren’t at work because of weather during the survey week, the most for the month since 2010. Bad weather can affect the payroll count if employees didn’t receive compensation for the entire pay period that included the 12th of month.
The week ended Feb. 15 was the coldest second week of February since 2011. The South Atlantic region of the U.S. experienced the most snowfall since 1983 and New England registered the most in 20 years during the period. February’s winter blitz followed the chilliest January in three years.
Wages were another bright spot in today’s report. Hourly earnings for all workers climbed by 9 cents, or 0.4 percent, on average to $24.31 last month, marking the biggest gain since June. Average weekly pay increased to $831.40 from $830.75.
Washington Report prepared by McAllister & Quinn
Washington Report Headlines
· Camp Unveils Tax Plan
· $3 Million from USDA to Protect Honey Bees
Federal Employee News
· Obama Reworks Fed Cuts in FY2015 Budget
News from the Halls of Congress
Camp Unveils Tax Plan
The top Republican tax-writer in Congress proposed restructuring the U.S. tax code to eliminate dozens of breaks to pay for reductions in the corporate and individual rates. The 979-page plan from Representative Dave Camp would mark the most significant changes to the U.S. tax system since 1986, affecting every part of the economy and reflecting politically unpopular tradeoffs that sparked immediate complaints from business groups. Though it’s unlikely to become law this year, Camp’s plan is a blueprint that lawmakers may use in the future and its ideas and details will shape U.S. tax policy going forward.
The proposal includes new limits on breaks for health insurance, retirement savings, mortgage interest and private equity managers’ carried interest. The plan would repeal breaks for student loan interest, moving expenses, accelerated depreciation, and state and local taxes. Corporations would have a top rate of 25 percent, down from 35 percent. Individuals would have a top rate of 25 percent on their taxable income, down from 39.6 percent.
The actual marginal rate for top earners would be higher. They would be subject to 10 percent surtax on a broader base that includes municipal bond interest and employer-provided health insurance. That would apply to married couples earning about $450,000 in 2013 or individuals making $400,000. Top earners also would lose certain benefits, such as the 10 percent bracket, as their income goes up.
Camp’s goal is to reshuffle the tax burden while generating the same amount of revenue for the government -- and doing so without reducing the burden for top earners. He proposed a 3.5 basis-point quarterly tax on assets of the biggest banks and insurers, and limits on the deductibility of entertainment, advertising and research expenses. He proposed repealing the last-in, first-out accounting method using by many oil companies and wholesalers. Some breaks, such as the tax exemption for credit union income, were untouched.
U.S. multinational companies would have lighter taxes on their future profits earned outside the country. Under the plan, they would pay a one-time tax on assets they’ve accumulated outside the U.S. under the current system, with the proceeds dedicated to the Highway Trust Fund.
For individuals, Camp would increase the standard deduction, repeal the personal exemption and expand the child credit. He would also reduce the size of a mortgage eligible for the mortgage interest deduction to $500,000 from $1 million. Those changes would reduce the percentages who itemize deductions to 5 percent from about 30 percent now.
Camp would create a new system for taxing capital gains and dividends -- a 40 percent exclusion. When applied to the top 35 percent rate, that would mean a 21 percent basic tax on long-term capital gains and dividends, which would be added to the 3.8 percent investment income tax that Camp would retain. The plan would push people into Roth-style retirement plans that rely on after-tax money instead of tax-deferred accounts. New contributions to standard individual retirement accounts would end.
Private equity managers and others who received profits income as carried interest would pay $3.1 billion more over the next decade, with a portion of income that is now considered capital gains becoming ordinary income with higher rates. The plan excludes real estate professionals.
$3 Million from USDA to Protect Honey Bees
The U.S. Department of Agriculture (USDA) announced last week the availability of $3 million to protect vulnerable pollinators through the Environmental Quality Incentives Program (EQIP). These targeted funds will support conservation practices that both foster environmental benefits and provide habitat and forage for pollinating species. Farmer applications for this special EQIP initiative are due March 21, 2014.
The funds will be available to farmers and ranchers located in the Midwest states of Michigan, Minnesota, North Dakota, South Dakota and Wisconsin for both technical and financial assistance to improve the health of honey bees, one of our most critical pollinators. The Midwest was chosen because it serves as the summer resting ground for roughly 65 percent of the commercially raised honey bees in the U.S.
Honey bees are solely responsible for pollinating many of the fruits and vegetables that are mainstays in the American food supply and, according to USDA, collectively support approximately $15 billion worth of agricultural production.
Though not referenced in the USDA EQIP announcement, the Conservation Stewardship Program (CSP) already provides financial and technical assistance on a nationwide basis — including but not limited to the five newly targeted EQIP states — for farmers and ranchers whose operations benefit pollinators.
The CSP rewards farmers specifically for conservation activities that establish pollinator habitat as part of field borders, vegetative barriers, contour buffer strips, grassed waterways, shelterbelts, hedgerows, windbreaks, conservation cover, and riparian forest and herbaceous buffers. The special CSP pollinator habitat enhancement is available on all types of agricultural land – cropland, pastureland, rangeland, and forestland.
In addition to the specific CSP enhancement option for pollinator habitat, other CSP enhancement options that would aid pollinators while also improving soil health and creating additional environmental benefits include intensive cover cropping, grazing management to improve habitat, extending the size of field borders and conservation buffers, native prairie restoration, multispecies native perennial plantings, hedgerow restoration, and advanced integrated pest management.
Through renewable, five-year contracts, CSP enrolls producers that demonstrate advanced conservation across their operations. Farmers and ranchers agree to maintain existing and adopt new conservation practices that address priority resource concerns, and they receive annual payments for the environmental benefits they produce. By packaging a variety of enhancements, farmers and ranchers can maximize conservation benefits and deal with issues like pollinator health in a comprehensive and long-term manner.
Federal Employee News
Obama Reworks Fed Cuts in FY2015 Budget
President Obama removed many of the cuts previously aimed at federal employees in his fiscal 2015 budget, instead promising to “unlock the full potential” of the government workforce.
Obama struck a conciliatory tone in the blueprint when referring to federal workers that has been present in the rhetoric of past budgets, but mostly not backed up with substance. The White House on Tuesday announced a new initiative, and corresponding funding, to boost federal employee training and retention.
The budget invests in the government’s most important resource, its workers, ensuring that we can attract and retain the best talent in the federal workforce and foster a culture of excellence.
The proposal would fund the Office of Personnel Management to build a stronger onboarding program for new members of the Senior Executive Service, as well as leadership and engagement training for new managers to address the changing needs of a 21st century workforce. Obama promised his administration will work with labor groups to recruit and retain individuals with high-demand talents and skills, and will begin demonstration projects in 2015 to identify best practices in hiring, increasing diversity and reducing skill gaps.
In his fiscal 2014 budget, Obama proposed federal employees contribute an additional 1.2 percent of their pay toward their retirement pensions. He also suggested switching to a new formula to calculate inflation, which would result in lower cost-of-living adjustments for federal retirees and Social Security beneficiaries. Both of those measures were eliminated from the current budget, in part due to the recent budget agreement putting in place a pension contribution hike for new employees.
Obama has said the so-called “chained-Consumer Price Index” is still on the table, but the gridlock between congressional Republicans and the White House on deficit reduction has prompted him to proposal from his fiscal 2015 budget. Obama will not formally introduce his 1 percent pay raise proposal for civilian employees until next week.
The budget was not all good news for federal employees; several agencies would face right-sizing under the president’s proposals. The intelligence community would face workforce reductions; the Environmental Protection Agency would modernize its workforce, resulting in job consolidations; the State Department would look to reduce the number of feds overseas at all agencies; the Transportation Security Administration would save $100 million in 2015 through staffing efficiencies; and, as previously announced, the Defense Department will reduce its headquarters funding by 20 percent. Overall, the Obama budget proposed 136 cuts, consolidations and savings opportunities, which would save $17 billion.
Obama recommended a series of changes to the Federal Employees Compensation Act that would generate $340 million in savings over 10 years. The proposal -- which is nearly identical to language included in a Senate bill to overhaul the U.S. Postal Service -- would reduce benefits to retirement-age employees receiving workers’ compensation, establish an up-front waiting period before those injured on the job begin receiving payments, and attempt to reduce improper payments. Obama also included the cuts in his fiscal 2014 budget.
The President also retained provisions to reform the Federal Employees Health Benefits Program. The administration wants to give OPM the power to contract with modern types of health plans rather than being limited to the current four statutorily-defined plans reflective of the 1950s insurance market. It would also give OPM the authority to negotiate pharmacy benefits for all FEHBP program participants. Currently, health plans participating in FEHBP contract with pharmacy benefits managers, who negotiate with drug manufacturers and pharmacies on behalf of their enrollees. OPM has said that working directly with a single pharmacy benefits manager would reduce costs to beneficiaries. Overall, the administration estimated the changes would save $2 billion over 10 years.