Sequestration Report Does Not Meet AYP

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Background: Earlier this summer, the Department of Education released a letter that was the first bit of clarification regarding the impact of the sequester on our nation’s public school. The letter clarified that the cuts won’t be felt in schools until the 2013-14 school year. The letter was a much-needed point of clarification, and came—in part—as a response to AASA’s sequestration survey, which reported a complete lack of meaningful information on the sequester.

Late this summer, the President signed the Budget Transparency Act, which required the President to issue a report for discretionary appropriations. The report would detail, among other things, an estimate for each category of the sequestration percentages and amounts necessary to reach the required savings/reduction, including program-specific projections. Anticipating the likelihood of a CR (continuing resolution), the report was to also include a list of the accounts to be sequestered and estimates pursuant to the CR levels. The report was to be issued on September 6.

This so-called transparency report represented an opportunity to provide more definitive guidance about program-level impact for our nation’s schools and was to come on the heels of a flurry of sequestration-related data this summer, much of it covered on this blog:

Better Late Than Never: Today, eight days late, the administration released the OMB Sequester Transparency report. Given the automatic, across-the-board nature of the sequester, the published numbers are not all that surprising. The report is based on a handful of assumptions/projections:

  • The cuts to non-defense discretionary (which includes education funding) would be 8.2 percent. 
  • The cuts to non-defense mandatory programs would be 7.6 percent.
  • FY13 discretionary funding—under the CR—will be equal to FY12 funding levels.

It should be noted—and has been reported in this blog—that the six-month CR that will be in effect when the sequester kicks in (1/2/13) includes a small increase (roughly 0.6%) over FY12 levels. Final FY13 numbers remain unknown. Between the funding gap of the FY13 CR and the yet-to-be-determined final FY13 numbers, the only certainty is that the sequestration percentages issued in this report are most certainly subject to change. Take them as a framework, not an absolute number.

Looking more closely at education, the cuts to USED will total $4.113 billion. In the full report, you can find the education-related items on pages 60-64. That’s about where the detail ends. While program-specific detail isn’t available in the report, one can apply some basic algebra to determine that an 8.2% cut would mean a loss of roughly $1 billion to IDEA (funded at $12.6 billion) and a loss of approximately $1.3 billion to Title I (funded at $15.8 billion).

Room for Improvement: The Sequestration Transparency Act included a requirement to detail the cuts at the program/project/activity (PPA) level, the report does not delve that far. PPA level reporting would have indicated the specific cuts to Title I, IDEA, Perkins, REAP, etc (like those I calculated in the previous paragraph). Why are the PPA calculations missing? Check out page 9 of the report: “…because of the STA’s reporting deadline of just 30 days, the large number of PPAs across all agencies and budget accounts, and inconsistencies in the way PPAs are defined, additional time is necessary to identify, re­view, and resolve issues associated with providing information at this level of detail.”

As a number wonk, I can sympathize with the task of projecting cuts for the 897 budget accounts included in the report. Providing PPA-level reporting and projecting cuts across thousands of programs/activities is a heavy lift, and the report cites this work burden and quick turnaround as the reason for the lack of PPA-level detail.

On the other hand, as an advocate for school system leaders who have to pass annual budgets, PPA level projections prove crucial to having some basis around which to start planning their budgets for the 2013-14 school year. Budget-account-level cuts, like those included in this report, are not that informative to the general public. I’m not sure they’re really even all that helpful for the average Congress member. It appears this transparency report—designed to help shed light on the issue of sequestration—isn’t all that clear to the audience it was intended for or helpful to the discussions it could inform.

As a numbers person, one thing sticks out: We already know—given that the FY12 used to calculate the numbers in the report is already below the FY13 CR numbers that will be in place on January 2—that the numbers in this report are not final, include a margin of error and will vary slightly from the actual cuts. I find it hard to believe that calculating to the PPA level would provide a margin of error much beyond the one already inherent in today’s report.

A little extra math would go a long way toward providing some type of planning framework for state and local governments that receive federal funding. Sequestration is across-the-board, blind to program effectiveness or value. As such, a rough estimation is as simple as multiplying the base funding level by the projected percentage cut. That is, for each program/project/activity:

Estimated Cut of Sequester = (FY12 funding level) x (8.2% sequester)

If we want to get tricky and attempt to address the funding increase included in the FY13 CR, it’s just one additional step:

Est. Cut of Seq = (FY12 funding level) x (0.612% CR increase)x(8.2% sequester)*

*This is a literal application of sequestration. There are certainly nuances to be considered. I simply provide this calculation to highlight that a little extra math could provide information that might be more helpful to the average American.

What Next: This week, Education Service Agency administrators were in town for their annual legislative conference. When sequestration came up in their discussion, it pretty quickly focused on what is certain to become a big issue: sequestration and maintenance of effort. The federal government is blatantly reducing federal funding to both Title I and IDEA, programs that have maintenance of effort provisions for state and local agencies. What flexibilities can/will be made available to state and local agencies so they are not left on the hook for this federal shortfall?

Also, what about programs like Title I, that have four separate formulas (basic, concentrated, targeted, and EFIG)? Should we assume all four will take the same cut, or will one of the programs (like basic) take the cut?

Beyond this, there’s the general question of ‘What next?’: Will Congress let the sequester happen? Will the Congress take action to address the consequence it assigned itself, picking up the work of the failed Joint Deficit Committee to identify a blend of spending cuts. Revenue increases and mandatory program reforms that will get the nation on track to save $1.2 trillion over the next ten years? Will there be some sort of middle ground, perhaps a plan to kick the timeline down the road, address the amount of cuts needed in one year, or some other half-way approach?

Just a quick analysis. We will continue to cover sequestration information as it becomes available.

 


Noelle---thanks for the link to this blog. I am presenting today to my board the basic information (or lack there of) related to sequestration, your blog helps reaffirm my understanding of the issue.
Posted by: Leslie Pellegrino at 9/26/2012 10:46 AM


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