Agencies may cut $4.6 billion to spare veterans

Thursday - 5/10/2012, 7:38am EDT

Robert Levinson, Bloomberg Government

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By Robert Levinson
Bloomberg Government

(Bloomberg) -- The White House has declared the Department of Veterans Affairs off-limits to "sequestration" budget cuts, and that means other nondefense agencies may have to bear an additional $4.6 billion in reductions next year.

As a result of last year's Budget Control Act, nondefense agency budgets face cuts totaling $39 billion in fiscal 2013 and $492 billion in fiscal years 2013 through 2021, according to the Congressional Budget Office.

Shielding Veterans Affairs means bigger cuts for other nondefense agencies. The $61 billion VA discretionary budget represents about 12 percent of the almost $520 billion in total nondefense discretionary spending, according to President Barack Obama's fiscal 2013 budget request.

Because the VA has been declared exempt, the rest of the nondefense agencies will have to absorb its $4.6 billion share of Budget Control Act cuts. If that occurs, other agencies will face additional average reductions of about $190 million each.

Automatic spending cuts, or "sequestration," are required because Congress and the president failed to agree on $1.2 trillion in deficit reduction through fiscal year 2021. The law requires the Pentagon to take 50 percent of the fiscal 2013 reduction of about $110 billion, or $55 billion, and nondefense agencies to take the other half. The portion to be applied to nondefense discretionary spending is $39 billion. The other $16 billion would come from a limited number of mandatory programs, such as Medicare.

All Programs Exempt

"All programs administered by the VA, including Veterans' Medical Care, are exempt of sequestration," Steven D. Aiken, deputy general counsel at the Office of Management and Budget wrote in an April 23 letter responding to a question from Government Accountability Office.

A portion of the proposed fiscal 2013 VA budget, about $79.4 billion, primarily in disability compensation and pensions, would not have been targeted because the budget law exempts most mandatory spending. The other $61 billion the president requested is largely for medical care and considered discretionary spending.

OMB hasn't given nondefense agencies or the Pentagon instructions on how to apportion sequestration cuts. Depending on those guidelines, agencies may have some discretion in determining exactly how to apply the reductions.

Legislation proposed by Armed Services Committee Chairman Howard P. "Buck" McKeon in the House and Senator John McCain and others in the Senate would exempt the Defense Department from fiscal 2013 sequestration. No similar effort is being made to protect nondefense spending.

(Robert Levinson is a defense policy analyst for Bloomberg Government. The views expressed are his own.)

To contact the analyst: Robert Levinson in Washington at rlevinson5@bloomberg.net

To contact the editor responsible: Anne Laurent at alaurent7@bloomberg.net

RELATED LINKS:

BGOV Fact Sheet: Sequestration in Action

CRS Report: "Sequestration," Selected Program Exemptions and Special Rules

BGOV Insight: Programs May Protected From Cuts

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