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The FDA and the BCA — A Compact Update

August 19, 2011

For the last two weeks ago, we have discussed the just-passed Budget Control Act of 2011 (BCA) (a.k.a. the debt limitation and deficit reduction agreement). The first week we focused on the impact on FY 12; the second week we wrote about the prospects for FY 13 and beyond, as will be determined by a congressional super committee.

Since BCA will have a heavy impact on FDA’s future, this week is devoted to a more compact and updated summary of what we expect.

Appropriations Caps and the Impact on FY 12. The BCA limits discretionary federal spending for every fiscal year from 2012 through 2021. By capping annual appropriations growth, federal spending will be reduced by more than $900 million over 10 years. For FY 12, the House and Senate appropriations committees cannot spend more than $1.043 trillion. Within this total, the ceiling for non-security programs (e.g., FDA, NIH, education, etc.) is slightly below the FY 11 appropriations level.

The ceiling is also substantially above the level the House has been using to mark up FY 12 bills. This is particularly encouraging because the House-passed Ag/FDA appropriations bill would cut FDA by $285 million below FY 11 (–11.5%) and $572 million below the President’s FY 12 budget request (–21%). The Alliance for a Stronger FDA and its members have been encouraging the Senate to put more money into FDA. The goal is to provide the agency with an increase in its FY 12 appropriation, not merely undo the cuts proposed in the House bill.

Senate staffs are currently preparing FY 12 appropriations bills using the higher aggregate spending levels in the BCA. Subcommittee and then full committee mark-ups are expected to start in early to mid-September and we are hopeful that FDA will do very well.

Even so, it is unclear how the House will respond. There are reports that the House appropriations committees have been directed to continue using the lower ceilings set by the House Budget Resolution. If this is true, it will make it quite difficult for the House and the Senate to agree on appropriations bills. Assuming this gets resolved, we believe agriculture/FDA appropriations has a good chance of being completed before September 30 and would not need to be included in the short-term continuing resolution that will be needed on October 1, 2011 (the first day of FY 12). .

FY 13 Appropriations and Beyond.  A second part of the BCA requires a further reduction of the federal deficit by $1.2 trillion over the next 10 years. This can be achieved by any combination of changes in entitlements, revenues and appropriations.

To pull together this deficit reduction plan, a so-called “super committee” has been appointed. It is composed of 12 members — 3 each from the majority and minority parties in the House and the Senate. The group’s work must be completed by November 23, 2011. Any resulting bill will not be amendable and must pass Congress by December 23, 2011. If no legislation passes or the President fails to sign it, then across-the-board cuts (“a sequester”) will occur during  fiscal year 2013, which starts on October 1, 2012.

The general consensus in Washington is that the super committee appointees are too divided ideologically to pull together the needed deficit package. Democrats will only accept entitlement changes if there are new tax revenues. Republicans are pledged to oppose any tax increase.

Ladd and I have discussed these predictions of failure and feel they are premature. The super committee will be under intense because of weakness in the economy and global concerns about the soundness of US fiscal policy. Polls suggest that there will be public pressure to find a compromise. In addition, sequester cuts would fall heavily on defense programs that most of Congress supports. While deadlock is always a possibility, we believe it would only occur after serious, good faith efforts are made to find the money without a sequester.

FDA is vulnerable in the “super committee/sequestration” process in two ways.

  • If the super committee produces a plan, it may include further cuts in discretionary spending. There is no guarantee that Congress would allocate those cuts in a way that would protect FDA and other essential programs.
  • If the super committee does not produce a plan, then the sequester would go into effect in FY 13.  If the entire 10-year $1.2 trillion in savings must be found through sequestration, then FDA is likely to sustain an across-the-board reduction in FY 13 of at least 8% to 10%.

Conclusion. Over the last 5 years, FDA has been one of few discretionary programs to receive substantial funding increases. This reflected both Congressional and Executive Branch recognition that the agency was dramatically underfunded for its growing responsibilities in an increasingly complex world. FDA still needs more resources, even though the downward budgetary pressures have become significantly greater.

Note: This analysis and commentary is written by Steven Grossman, the Deputy Executive Director of the Alliance for a Stronger FDA.

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