Informal negotiations between the House and Senate on a final federal budget for fiscal year 2006 have already started, with the aim of producing a conference agreement that can clear both chambers. The race for a budget cleared a hurdle on March 17 when both the House and Senate passed separate budget resolutions.
Cuts as high as $18.7 billion over five years to fundamental low-income programs such as the Earned Income Tax Credit (EITC), Supplemental Security Income (SSI) and many others are on the table, as well up to $20 billion in cuts to Medicaid and up to $5.3 billion in cuts to Food Stamps.

This week Senator Judd Gregg (R-NH), Chairman of the Senate Budget Committee, told House budget negotiators that he would be willing to accept up to $43 billion in cuts over five years to mandatory programs such as Medicaid, EITC and others. The Senate budget resolution (S. Con. Res. 18) included reconciliation instructions that would cut $17 billion from mandatory programs over five years, of which up to $2.8 billion could come from programs serving low-income people. The House resolution (H. Con. Res. 95) had instructions that would cut $69 billion over the same period, about half of which is estimated to come from low-income programs.

It is expected that much of the negotiation will happen informally among House and Senate Republicans before a formal conference committee meets. The Senate has named its conferees but the House has yet to do so – and is unlikely to do so until they are close to a deal. The Senate conferees are: Senators Gregg, Wayne Allard (R-CO), Pete Domenici (R-NM), Charles Grassley (R-IA), Kent Conrad (D-ND), Patty Murray (D-WA) and Paul Sarbanes (D-MD).

April 15 is the statutory deadline for a final budget resolution, but there are no consequences for missing the deadline, which Congress has often done in the past.

Cuts to Ways and Means Programs
The key difference between the House and Senate resolution is the size and scope of cuts to mandatory (entitlement) programs. Particularly worrisome to low-income advocates are instructions included in the House resolution to force deep cuts in low-income mandatory programs.

The House Committee on Ways and Means are instructed to find $18.7 billion in “savings” from programs under their jurisdiction. The instructions do not specify which programs should be cut, but those under the Ways and Means jurisdiction include the Earned Income Tax Credit (EITC), Supplemental Security Income (SSI), foster care and adoption assistance, child care, Temporary Assistance for Needy Families (TANF), child support enforcement, unemployment insurance, and the Social Services Block Grant (SSBG).

In the House resolution, the Energy and Commerce Committee is instructed to find $20 billion in savings – at least $15 billion of which would come from Medicaid. The House Agriculture Committee is asked to find $5.3 billion in savings and the chairman of that committee has said he expects cuts to come from Food Stamps. The instructions direct the affected committees to produce a bill by a certain date making policy changes that will result in savings.

The Senate agreed to $17 billion in cuts to mandatory programs. In order to get to the $43 billion in cuts contemplated by Sen. Gregg, the Senate would have to cut $26 billion more than it had originally agreed to. The essential low-income programs targeted by the House (EITC, SSI, TANF, Medicaid, Food Stamps, and much more) would be seriously threatened by cuts this deep. The Finance Committee, which has jurisdiction over Medicaid, EITC, SSI, TANF and other programs would receive instructions that would force cuts from those programs. Senators did not approve such reconciliation instructions in the Senate budget resolution. The Senate resolution does direct the Agriculture Committee to cut $2.8 billion, which could come from Food Stamps.

EITC in the Crosshairs
Within the Ways and Means Committee, the EITC remains the biggest target and was the only program cited by Budget Committee Chairman Jim Nussle (R-IA) as a potential source for savings for that committee. If the final resolution instructed the Ways and Means Committee to cut $18.7 billion and the committee decided to target the EITC exclusively, the credit would be cut by $3.9 billion in 2006, or 11 percent. If the committee chose to distribute those cuts to all 21 million EITC recipients, the credit would be reduced by an average of $190 per year. (In other words, 21 million families and individuals would see an average tax increase of $190.) Alternatively, the committee could decide to achieve its savings by eliminating EITC eligibility for certain categories of individuals, such as childless workers.

A new study by the Bell Policy Center finds that 150,000 active duty military members and their families are eligible for the EITC. If the Ways and Means Committee spreads the $18.7 billion in cuts across all EITC filers, military families would face an average tax increase of $190 (like other EITC filers) – and a total tax increase of $300 million to military families nationwide. In a floor statement, Sen. Ken Salazar (D-CO) said, ” At a time when many of our military personnel are overseas and when our national guard reserves have been called up at historic rates, we should be providing for our men and women in uniform.” Calling an EITC hike “not fair and not right,” the Senator called on his colleagues to reject any cuts to the EITC.

The Ways and Means Committee could choose to cut other programs, such as SSI, which provides benefits to 7 million poor people who are elderly or have severe disabilities. Other programs at risk include TANF, foster care and adoption assistance, and child care.

House Members Push Leadership to Roll Back Medicaid Cuts
Not all Republicans are eager to embrace $15 to $20 billion in cuts to Medicaid as contained in the House resolution. Forty-four Republican members have signed a letter to their leadership urging them to reject cuts to the program and instead create a Medicaid commission to study how to improve the program. The letter, organized by Rep. Heather Wilson (R-NM), is a signal that resolving the Medicaid issue will not be easy for the conference committee. The Senate, led by Sen. Gordon Smith (R-OR), voted to strip out $15 billion in cuts to Medicaid and instead create a commission. Reports from the Hill yesterday are that negotiators are working towards Medicaid cuts that could reach $12 billion.

Outcome Still Unclear
Next week will be critical in negotiations. Although large differences remain between the House and Senate approach, members of Congress are feeling even greater pressure to pass a budget resolution this year.

Last year Congress was unable to agree on a final budget resolution, largely because four Senate Republicans insisted the final agreement include a pay-as-you-go provision which would require legislation that increased the deficit (including new tax cuts) to be fully paid for or else be subject to a point of order (which could be overridden by 60 votes). This year a similar amendment offered by Senator Russ Feingold (D-WI) was defeated on the Senate floor.

Deciding the level of Medicaid cuts will be a principal hurdle for negotiators. Negotiators will be looking to the seven Republican Senators who broke with the leadership to support the Smith amendment on Medicaid to find out what – if any – conference agreement they can support. The seven Senators are Olympia Snowe (ME), Susan Collins (ME), Lincoln Chafee (RI), Arlen Specter (PA), Mike DeWine (OH), Norm Coleman (MN), and Gordon Smith (OR). Four of those Senators – Collins, Specter, DeWine and Smith, voted for the Senate budget resolution, which passed by a slim margin (51-49). If Medicaid or other cuts not approved by the Senate are included in the final budget deal, it may move some of these key votes into the “no” column.

Advocates for human needs, joined by environmental groups opposed to a provision in the budget to drill in the Arctic National Wildlife Refuge, are continuing efforts to educate members of Congress and the public about the dangerous impact of the proposed cuts.

CBPP: House Budget Resolution Would Require Much Deeper Cuts Than Senate

CBPP: Assessing the Proposal Adopted by the Senate

CHN: State Fact Sheets on Budget Cuts

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