Unable to reach a compromise on how best to reduce the nation’s debt, the Joint Committee on Deficit Reduction dissolved just before the Thanksgiving holiday. The committee was required by the debt limit law to issue its report to Congress by November 23, with the House and Senate slated to vote on the recommendations one month later. Now that the deadline has been breached, the law requires across-the-board cuts of $1.2 trillion over the next decade. These automatic cuts will not begin until 2013, and for the most part, entitlement programs like Medicare, Medicaid, and Social Security will be shielded from any sequester.

In the aftermath of the failed negotiations, Congress has turned its attention to other matters, including an extension of the payroll tax cut, jobless benefits, and other year-end matters. As part of a budget-cutting deal last December, Congress negotiated a two percentage point reduction – from 6.2 percent to 4.2 percent – in the employee share of the payroll tax rate. With this provision set to expire on December 31, Congress is looking at ways to extend, and perhaps expand, the provision for an additional year.

Senators Claire McCaskill (D-MO) and Susan Collins (R-ME) have offered a bipartisan proposal that would not only extend the current payroll tax cut for an additional year, but would also reduce the employer’s share of the tax on the first $10 million of a company’s wage costs. In addition, the legislation would delay a new pollution standard for industrial boilers, a proposal that extends a hand to GOP senators. The plan also includes an infrastructure component that would supplement funding for highway and bridge programs. While this represents a strong bipartisan effort, Republican lawmakers remain strongly opposed to the legislation’s offset – a 1.9 percent surtax on income over $1 million.

Across Capitol Hill, GOP leaders will soon unveil their payroll tax proposal, which is expected to incorporate an extension of unemployment insurance benefits and language to avert a scheduled cut in Medicare reimbursement payments to health care providers. House Republicans also plan to include provisions to remove barriers to construction of the Keystone XL pipeline. The measure will be offset by extending a pay freeze on federal employees and by raising the cost of Medicare premiums on high-income earners.

On the appropriations front, lawmakers are scrambling to complete work on the nine remaining spending bills for fiscal year 2012. Both chambers are under pressure to act before stopgap appropriations provided as part of an earlier fiscal 2012 appropriations package (PL 112-55) expire on December 16. There is little appetite in Congress to extend the spending battle into the new year, so it is likely that a continuing resolution (CR) will carry any unsettled appropriations through the current fiscal year.

At this point, the most likely candidates for a CR are the Labor-HHS-Education (HR 3070) and Financial Services (HR 2434) bills, primarily because they fund elements of health care reform and the financial regulatory overhaul advanced by Democrats in the last Congress. A CR is also possible for the Interior-Environment measure (HR 2584) as lawmakers continue to disagree about potential policy riders.

The final appropriations package is expected to be released early next week and voted on by the House and Senate before Congress adjourns for the year.

In other news, Representative Martin Heinrich (D-NM) introduced legislation – the County Payments Reauthorization Act of 2011 (HR 3599) – on December 7 that would extend for five years the Secure Rural Schools (SRS) and Payment-in-Lieu-of-Taxes (PILT) programs. SRS payments would start at fiscal year 2011 levels and decline five percent per year, while PILT payments would be maintained at current levels.

HR 3599 is a companion bill to Senator Jeff Bingaman’s (D-NM) SRS legislation (S 1692). While the Senate legislation has garnered bipartisan support, House Democrats and Republicans are split on how to move forward. Democrats would prefer a clean extension of the program, while House Republicans are insisting on new forest management provisions that would expand logging and increase land usage. 

PILT does not expire until next year; however, SRS expired in September. Last payments are expected to go out at the end of this year, and a failure to extend SRS will have a devastating impact on rural forested counties in California.

Like SRS and PILT, the National Flood Insurance Program (NFIP) needs to be reauthorized. The current extension expires December 16 and must be renewed in order for new flood insurance policies to be issued. The Senate approved legislation December 7 that would extend the NFIP through the end of next May. 

House leaders, on the other hand, would prefer to extend the program through March. If the chamber fails to act on a stand-alone extension, it could be added to the omnibus appropriations measure currently under discussion. 

It should be noted that the House and Senate have been working throughout 2011 to craft legislation that would reform the NFIP. Earlier this year, the House approved a five-year NFIP renewal and reform package. In the Senate, the Committee on Banking recently passed its own five-year measure, but the bill must still be considered by the full Senate and reconciled with the House legislation. Of particular concern to counties is a provision in the Senate bill that would require certain homeowners and businesses to purchase federal flood insurance. Specifically, the legislation would designate land that is currently protected by properly constructed and maintained flood control structures as “areas of special flood hazard,” which would trigger flood insurance purchase requirements and land-use restrictions.

Finally, a bipartisan group of House members are pushing forward their own six-year transportation reauthorization bill. In a letter to President Obama from Representatives John Carney (D-DE) and Aaron Schock (R-IL) on behalf of 111 House members, the two lawmakers emphasized the need for their bill to help boost the economy and noted that “the traditional six-year time-frame allows state departments of transportation to prepare for substantial infrastructure projects.”

House Republican leaders plan to offer a transportation reauthorization proposal as well. However, with the extensive to-do list for Congress between now and the quickly approaching holiday break, leadership has pushed work on the proposal until next year. With the most recent transportation extension keeping highway and transit programs funded at current levels until March 2012, House GOP members have signaled that they have sufficient time to clear a long-term reauthorization bill.