February 15, 2018

On February 12, President Donald Trump unveiled a $4.4 trillion budget proposal, which details his administration’s priorities for fiscal year 2019.  Prior to its release, officials had to update the document to acknowledge the new spending caps agreed to as part of the recently enacted Bipartisan Budget Act (BBA; PL 115-123).  The two-year budget accord, which was passed by Congress last week, provides nearly $300 billion in additional federal funding in fiscal years 2018 and 2019.  For fiscal year 2019, the agreement lifts the Budget Control Act’s (PL 112-25) discretionary spending limit by $85 billion for defense and $68 billion for non-defense programs.

In total, the administration’s budget request for fiscal year 2019 calls for nearly $1.2 trillion in discretionary spending authority.  This includes $540 billion in non-defense spending, which is $57 billion less than the new BBA caps.  While the White House is recommending less spending on domestic programs, the defense portion of the budget request exceeds the $647 billion funding limit established for fiscal year 2019.  The president’s request for $716 billion in defense spending instead utilizes off-budget emergency Overseas Contingency Operations funds to make up the difference.

The centerpiece of the administration’s budget is a plan to devote $200 billion over the next decade to improve the country’s crumbling infrastructure.  Starting with an initial investment of $44.6 billion in fiscal year 2019, the administration hopes its infrastructure initiative will help spur a total investment of $1.5 trillion.  (Please see additional details of the infrastructure proposal below).  It should be noted that the Trump budget also proposes considerable reductions to a number of transportation programs, particularly rail and transit, while seeking several program eliminations, including the popular Transportation Investment Generating Economic Recovery (TIGER) grants program.

The president also used the budget to outline his plans for addressing the nation’s opioid epidemic.  Specifically, the request seeks $13 billion in new spending over the next two years for programs that address prevention, treatment, recovery, and mental health services, among other things.  It should be noted that the BBA has already committed an additional $3 billion in opioid funding for fiscal year 2018, as well $3 billion for fiscal year 2019.

Another clear priority for Trump in the budget is border security and immigration enforcement.  As expected, the administration is requesting $18 billion over two years to build a wall along the southwest border.  The budget would also provide enough resources to hire and support 2,750 additional law enforcement officers and agents at U.S. Customs and Border Protection (CBP) and U.S. Immigration and Customs Enforcement (ICE).

While Trump seeks to direct additional federal funding to his priorities, the administration’s budget would slash funding for a number of programs important to California’s counties.  With regard to housing, the plan would eliminate the Community Development Block Grant (CDBG) program, as well as the HOME Investment Partnerships program.  The budget also proposes setting minimum work requirements for those in public housing.

In addition, Trump is proposing significant reductions to the Supplemental Nutrition Assistance Program (SNAP), known as CalFresh in California.  The plan put forward by the administration would reduce SNAP spending by nearly 30 percent over the next decade, accomplished largely by imposing new work requirements for “able bodied” SNAP recipients and requiring beneficiaries to accept “food box” deliveries in addition to financial assistance.  For his part, Office of Management and Budget (OMB) Director Mick Mulvaney has compared the proposed program to “Blue Apron,” a popular subscription-based food delivery program.

With regard to Medicaid, the president’s budget proposes drastic changes that would reduce federal spending by nearly $1.4 trillion over the next decade.  The Medicaid savings would largely be achieved by repealing the Affordable Care Act (ACA) and replacing it with the reforms found in last year’s failed Graham-Cassidy proposal, including Medicaid per capita caps and block grants.  Graham-Cassidy also proposed eliminating funding for the ACA’s Medicaid expansion.

Dozens of other county programs also are targeted for drastic cuts, including the Temporary Assistance for Needy Families (TANF) program, state and local law enforcement grants, state and local Homeland Security and FEMA grants, renewable energy programs, as well as programs administered by the Environmental Protection Agency (EPA).

Even more concerning, the president’s budget targets a number of county programs for elimination, including the State Criminal Alien Assistance Program (SCAAP), the Community Services Block Grant (CSBG), the Low Income Home Energy Assistance Program (LIHEAP), and others. 

Finally, the budget proposes level funding ($465 million) for the Payments in Lieu of Taxes (PILT) program.  It does not, however, include a proposal to reauthorize or extend the Secure Rural Schools (SRS) program.  Instead, Trump believes that comprehensive forestry reforms are needed to spur economic development, restore the Nation’s forests, and improve their resilience to wildfires.  The administration also is proposing a new annual wildfire cap adjustment to be made available for the cost of fires that exceed the 10-year average.

For its part, CSAC is continuing to analyze the impact of President Trump’s proposed budget and will be working with members of the California congressional delegation throughout the fiscal year 2019 appropriations process to protect funding for programs that are of vital interest to California’s counties.

Trump Administration Releases Infrastructure Proposal

As indicated above, the White House released this week President Trump’s long-awaited infrastructure plan.  The document, which does not include legislative text, provides a detailed framework for congressional authorizing committees to consider as they undertake the process of drafting what is expected to be a wide-ranging public works package.

As previously advertised, the White House is proposing $200 billion in direct federal spending in order to leverage as much as $1.5 trillion in state, local and private investment.  Under the administration’s plan, funding would be allocated across a number of federal departments for the following new programs:

Infrastructure Incentives Program – $100 billion.

Under the program, the Department of Transportation, the U.S. Army Corps of Engineers, and the Environmental Protection Agency would solicit grant applications every six months for a broad array of infrastructure projects (i.e., surface transportation, aviation, rail, waterways, water resources, etc.).  States, local governments, Metropolitan Planning Organizations (MPOs), and other entities would be eligible to apply for grant funding, with projects evaluated under a competitive rating system that would take into account, among other things, the amount of non-federal revenue available for the project in question. 

Pursuant to the infrastructure plan, federal grant awards could not exceed 20 percent of the total project cost.  Incidentally, this would flip the traditional 80-20 federal-state/local match that exists for most federal highway programs.

Rural Infrastructure Program – $50 billion.

Eligible projects would include: transportation (roads, bridges, public transit, rail, airports, maritime and inland waterway ports), broadband and other high-speed data conduits, water and waste (drinking water, wastewater, stormwater, land revitalization and Brownfields), water resources (flood risk management, water supply, and waterways), and power and electric.  Eighty percent of program funds – which would be distributed as block grants for areas with populations of less than 50,000 – would be provided to the governor of each state based on a formula that takes into account rural lane miles and relative population.

Twenty percent of program funds would be reserved for rural performance grants.  The proposal states that a portion of funds would be reserved for tribal and territorial infrastructure.

Transformative Projects Program – $20 billion.

This competitive grant program, administered by the Department of Commerce, would provide federal assistance to projects that are “likely to be commercially viable, but that possess unique technical and risk characteristics that otherwise deter private sector investment.”  The program would support projects that are capable of generating revenue, would provide net public benefits, and would have a significant positive impact at the national, regional, state, or metropolitan level.

Infrastructure Financing Programs – $20 billion.

Of the $20 billion total, $14 billion would be made available for the expansion of existing credit programs (i.e., Transportation Infrastructure Finance and Innovation Act (TIFIA), Water Infrastructure Finance and Innovation Act (WIFIA), Department of Agriculture Rural Utilities Service lending program, etc.) to give State and local governments increased opportunity to finance large-scale infrastructure projects under terms that are more advantageous than in the financial market.

The remaining $6 billion would be available to broaden the use of Private Activity Bonds (PABs).  The proposal calls for, among other things, allowing broader categories of public-purpose infrastructure, including reconstruction projects, to take advantage of the bonds.  The plan also would eliminate the Alternative Minimum Tax preference on PABs.

Federal Capital Financing Fund – $10 billion.

The infrastructure proposal calls for the establishment of a mandatory revolving fund to finance purchases of federally owned civilian real property.  If approved by Congress, the revolving fund would transfer money to agencies to finance large-dollar real property purchases.  Purchasing agencies would then be required to repay the fund in 15 equal annual amounts using discretionary appropriations.

Other Key Provisions

The Trump plan includes a number of provisions aimed at enhancing project delivery and environmental streamlining, including a proposal to revise the Statute of Limitations (SOL) under Section 1309 of the Fixing America’s Surface Transportation Act (FAST Act).  That particular section of the law allows up to five qualified states to participate in a pilot program to conduct environmental reviews and make approvals for both state and local transportation projects under State environmental laws and regulations instead of the National Environmental Policy Act (NEPA).

While California is well suited to take advantage of the new environmental “reciprocity” program, Caltrans has indicated that it will not apply for participation due to the heightened litigation risks to state and local governments as the result of the existence of a two-year SOL on covered projects.  The Trump proposal calls for bringing the Section 1309 program’s SOL in line with the judicial review requirements that are in place for other highway and public transportation projects (150 days).

The administration’s infrastructure plan also includes a host of other provisions aimed at reducing the amount of time it takes to permit transportation projects, including establishing a “One Agency, One Decision” environmental review structure.  Among other things, the structure would set a firm deadline of 21 months for lead agencies to complete environmental reviews through the issuance of a Finding of No Significant Impact (FONSI) or Record of Decision (ROD), as appropriate.  Additionally, the proposal would establish a deadline of three months after the lead agency’s FONSI or ROD for federal agencies to make decisions with respect to necessary permits.

The proposal also includes a number of proposed reforms to the Clean Air Act and the Clean Water Act.

Finally, the Trump plan would establish a new Interior Maintenance Fund in the U.S. Treasury, which would be comprised of 17 additional revenues from the amounts due and payable to the United States from mineral and energy development on Federal lands and waters.  Under the proposal, the receipts generated from mineral and energy development would be available for capital and maintenance of public infrastructure (i.e., key Interior assets such as dams, bridges, and power infrastructure) and to address deferred maintenance backlogs within the National Park Service and the U.S. Fish and Wildlife Service.

Outlook

The reaction to the Trump administration’s infrastructure proposal on Capitol Hill was mixed.  While members of both parties have embraced the idea of advancing a major public works package designed to fix and upgrade the nation’s crumbling infrastructure, many Republicans and Democrats alike are skeptical that a viable funding source to pay for new spending will be identified and agreed to by Congress.

For his part, the president has reportedly indicated that he is open to a 25-cent fuel tax increase as a possible means of funding the infrastructure plan.  Revenues from the federal gas tax, which has not been increased in 25 years, have not kept up with spending on highways and transit, resulting in a series of General Fund bailouts.  Based on current projections, the HTF will run short of cash beginning in 2021.

Looking ahead, a number of committees in the House and Senate are expected to hold hearings on the Trump infrastructure plan in the coming weeks.

Immigration Reform

At press time, the Senate was slated to hold a series of procedural votes on several competing immigration reform proposals, including a new bipartisan plan offered by roughly two dozen members of the upper chamber.  The bill, spearheaded by Senator Susan Collins (R-ME), would grant a pathway to citizenship for roughly 1.8 million young undocumented immigrants, as well as provide $25 billion for various border security measures, including construction of a border wall. 

While several other measures are expected to be voted on, GOP Senate leaders are backing a plan sponsored by Senator Charles Grassley (R-IA).  The proposal, which mirrors President Trump’s own immigration plan, includes the following: a pathway to citizenship for young undocumented immigrants; $25 billion in funding for border security; strict limits on family-based migration; and, an end to a diversity visa lottery.  For their part, most Democrats oppose the latter two facets of the Trump-Grassley proposal and are therefore expected to vote against the bill.

Across Capitol Hill, House Speaker Paul Ryan (R-WI) has committed to bringing an immigration package to the floor “that the president will sign.”  At this point, it is unclear when that will occur.  While the timing for House action remains uncertain, Ryan is expected to schedule a vote on legislation (HR 4760) sponsored by Representatives Bob Goodlatte (R-VA) and Michael McCaul (R-TX) that includes the aforementioned features of the Grassley proposal.

In addition, HR 4760 includes provisions that would cut off certain federal grant funds to states and localities that do not cooperate with federal immigration authorities.  Pursuant to the bill, noncompliant jurisdictions would be ineligible to receive DOJ or DHS grant funding that is substantially related to law enforcement, terrorism, national security, immigration, or naturalization.

It should be noted that current law (8 USC Section 1373) forbids state and local governments from restricting the intergovernmental exchange of information regarding an individual’s citizenship or immigration status.  HR 4760, however, would vastly expand this authority by expressly prohibiting states and localities from implementing policies that bar their officials from undertaking certain activities, such as inquiring as to an individual’s immigration status or notifying the Federal government regarding the presence of undocumented individuals who are encountered by law enforcement officials.

The House legislation also includes language that would “clarify” ICE detainer authority.  Under the bill, the secretary of DHS would be authorized to issue a detainer to state/local law enforcement if the secretary has probable cause to believe the individual in question is an inadmissible or deportable alien.  The statutory probable cause language represents a new approach to modifying federal immigration law in an attempt to ensure that local jurisdictions honor all ICE detainers.