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What We’re Expecting to See This Week (And After)

February 15, 2011

The following is a supplement (as of February 12, 2011) to the Alliance’s normal “Friday Update.”

ANALYSIS AND COMMENTARY

For Alliance members, next week is likely to be the most hyperactive time since the organization’s creation nearly 5 years ago. On Monday, the President will release his request for FY 12 funding. While Congress is unlikely to accept his recommendation, it is critically important to FDA whether the President suggests increases, flat funding or cuts for the agency.

On Tuesday, the House will begin consideration of HR 1, making continuing appropriations for the remainder for FY 11 (through September 30, 2011). Late Friday night (February 11), the House Appropriations Committee released the text of the bill that will be considered on the House floor next week. The FDA did not do well in this process, although many federal agencies sustained much larger proposed cuts.

President’s FY 12 Budget Request

If the pattern of past years repeats, there will be confusion on Monday after the release of the President’s budget request. Many of the numbers being discussed by media and commentators will be inaccurate or out of context.

The Alliance will supply its analysis as quickly as possible, providing it to both our members and the media. For those trying to understand better, here are the most common source of misunderstandings:

  • What is the base being used in the President’s request? A proposed $100 million increase (or decrease) for FY 12 means something different if it is based on the FY 10 funding level (which is also the current FY 11 CR level) or on the President’s FY 11 request. If the President follows past practice, the FY 12 budget request will be based on his FY 11 budget request. Because that was never adopted by Congress and there is no prospect that it will be, it means that every number in the President’s request has to be adjusted before figuring out its meaning.
  • For FDA specifically, does any given budget number include user fees? If comparisons are made between numbers, are they both calculated the same way? As recently as this past week, there was media confusion because the House appropriations committee’s initial determination for FDA for the FY 11 CR made reference to the President’s FY 11 funding request. The intended reference was to the budget authority (BA) appropriations request (from general revenue), excluding user fees. However, some analysts tried to interpret the figures with reference to the President’s request that included user fees. Understandably, the resulting analysis was inaccurate.
  • The President’s budget request is usually “inflated” by including funding from user fees that are proposed, but not authorized. In many cases, the proposed user fees have been submitted to Congress year after year and it is clear they will never be adopted.
  • The President’s budget request is distorted by the inclusion of tobacco user fees, which represent $450 million in agency income in FY 11. While BA comparisons are not affected by these monies, they make any increase in total funding for the agency look much greater that it really is. The tobacco program is distinct and self-funded. It’s growth in no way helps FDA meet its traditional public health mission.

In terms of timing, the House and Senate want to resolve FY 11 before devoting much time to FY 12. A fast schedule (probably unrealistic) for FY 12 funding would be:

  • Hearings in March/April
  • S/C and full committee mark-ups in April/May
  • Floor action and conferences in June and July
  • No bills (or only conference reports) left for September action?

More likely, there will continue to be sharp disagreements between the House and the Senate on funding levels, delaying the passage of FY 12 funding bills.

House Consideration of HR 1, the FY 11 Continuing Resolution (CR)

The current FY 11 CR expires on March 4. Until then, almost the entire federal government (including FDA) will be funded at the FY 10 enacted level. For FDA that has meant a budget of $2.35 billion. Because the agency has been working under a part year CR, it is assumed that they have spent proportionally less on a daily basis, knowing that further reductions were possible.

Based on its significant gains in the last election, the House Republican majority feel committed to immediate passage of sweeping budgetary cutbacks. Compromises were proposed in the House this week that would have made a substantial cut in FY 11, while recognizing that $100 billion in cuts was not possible with nearly half of FY 11 already done.

This approach was rejected. On Thursday and Friday, the House appropriations committees had to find an additional $20+ billion in “savings” to reach the target of $100 billion below the President’s FY 11 budget request. In the first (compromise) round, FDA was slated for $220 million below the President FY 11 request, which is also $62 million below the FY 10 enacted level. The agency was hit hard in the second round of much deeper cuts. The bill that will be debated on the House floor next week would fund FDA at $400 million below the President’s request level, which is about $242 million below the FY 10 enacted level.

This represents about a 10% decrease in available agency funding in the current fiscal year. Since the cuts would all have to be absorbed in the second half of the fiscal year, the actual cut (in percentage terms) is likely to be larger. The exact magnitude depends on how much money FDA held back (from spending in the first half of the year) as a hedge against cuts later in the year.

Here is the timeframe and process for consideration of HR 1:

  • Next Tuesday (2/15) – floor debate and open amendments allowed (most people are more familiar with House debate under a closed rule, where amendments are severely restricted; this will be more like the Senate, where many amendments are usually offered. Expect the House to be confronted with proposals that would impose even greater cuts compared to the version of HR 1 that will come to the floor).
  • By next Friday (2/19) – House expects to have passed HR 1
  • House and Senate both recess on 2/19 and returns 2/28
  • Senate then has less than 5 days to act on the CR and reach a compromise with House on FY 11 CR (by March 4)

Most commentators expect several short-term CR extensions before House/Senate finally agree on serious cuts that are, nonetheless, much less than House levels. This assumes that Senate consideration will be straightforward: 53 Senate Democrats will agree to lesser cuts and outvote the 47 Senate Republicans. The Senate is rarely that simple. We already know that a bipartisan group of Senators is looking for ways to get discussion going along the lines of the final report of the President’s Deficit Reduction Commission. This may push entitlements and taxes into the CR debate. Also, Senate Majority Leader Reid has said he will fight the House cuts, but may not have 53 votes to do so. In contrast, Senate Minority Leader McConnell has said he has 47 Republican votes for whatever passes the House. That may not be true, but leaves open the possibility that he would need only a few fiscally-conservative Democrats in order to have control of the agenda in the Senate.

A chart provided elsewhere on this web site gives the Alliance’s analysis of the fate of FDA in the version of HR 1 that will be considered by the House next week. It is unofficial and reflects some assumptions about the proper interpretation of the numbers provided. The charts provided by the appropriations committees are accurate, but hard to interpret. Therefore, this analysis is based on the proposed bill text for HR 1.

There are several additional caveats. The chart shows only budget authority appropriations, which is the Alliance’s focus. The user fee portion of FDA’s funding remains the same and is not impacted by these proposed budget cuts. We have made the reasonable assumption that user fees will be allocated (to centers and offices) in an identical manner to what the Administration proposed in its FY 11 request. Should that change, the per-center numbers for the House proposal would be different (other than for food and NCTR, which don’t receive user fees).

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