Earlier this year, President Trump put his signature on a $1.3 trillion omnibus spending deal. To get the votes for the higher defense spending he wanted, lots of other spending got tacked on, too. That’s politics. The President’s regret about this loose-spending budget, however, did spur his administration to resurrect a long dormant budget cutting tool known as rescissions. Through this process, unused since 2000, a President can send a package of proposed cuts in unspent agency funding to Congress for a simple-majority vote.
The rescission list Trump submitted to Congress would implement savings of $15 billion in budget authority. Because most of this budget authority would otherwise remain unspent, outlays would be reduced by just $3 billion – less than a tenth of a percent of total spending this year. Nevertheless, the plan generated hyperbolic, apocalyptic reactions, and distortions about what the rescission does, especially regarding its impact on the Children’s Health Insurance Program (CHIP).
Myth #1 The rescission will slash funding from children’s health programs.
The President’s proposal would rescind $5 billion in budget authority from previous CHIP allotments that have expired. The expiration of the budget authority means that the funding is no longer available for obligation. It can’t be spent. Rescinding the amount will have zero impact on CHIP outlays.
In addition, $1.9 billion would be rescinded from the Child Enrollment Contingency Fund. This will also have no impact on outlays. The Fund was established in 2009 as an extra backstop source of CHIP funding available to states that experience a shortfall in funding and higher than expected enrollment rates. This is not expected to occur this year.
The Washington Post reported that at the beginning of this year, the Fund had reserves of $4.3 billion. The omnibus rescinded $1.9 billion (which was diverted to increase spending in other programs). If the President’s rescission is approved, $500 million would remain in the Fund. This should be sufficient to cover any immediate needs: Over the ten years since it was established, only three states, Iowa, Michigan, and Tennessee, have tapped the contingency funding, for a combined total of $109 million.
For 2018, Congress allotted $21.5 billion in CHIP funding to the states. This funding would remain entirely untouched by these rescissions. CBO projects that $16 billion of the total allotments will be spent this year.
Myth #2: The contingency funding rescission will have to be restored next year anyway.
Bruce Lesley, President of First Focus, a children’s advocacy organization, argued that rescinding $1.9 billion in funding from the Child Enrollment Contingency Fund won’t matter because “CHIP requires the fund to be set at 20% of the state allotments.” This is false. The Fund was originally established in 2009 and the funding was set at 20 percent of CHIP allotments provided that year. For subsequent years, the enacting legislative language stated that “such sums as are necessary for making payments to eligible States for such fiscal year or period, but not in excess of … 20 percent of the amount made available … for the fiscal year or period.” This is a ceiling on the Fund, not a floor.
Although the initial funding was provided at that amount, subsequent Congresses are not bound to continue to appropriate the same level of funding, especially since experience has demonstrated that fewer dollars are needed.
Myth #3: The rescissions will endanger children’s health.
The rescissions will not impact actual CHIP spending and will not impact coverage. The Congressional Budget Office reported that rescinding the “unobligated balances would reduce budget authority by $7 billion, but would not affect outlays, or the number of individuals with insurance coverage.”
If there is some emergency that would cause multiple states to experience a CHIP shortfall, there are also other sources of backup funding in addition to the contingency fund. Unobligated funding from states with surplus allotments would be redistributed to the needy states. In addition, the Congressional Research Service reports that additional CHIP funding can be provided from Medicaid.
What would happen if those additional sources of funding prove insufficient? Congress would likely authorize additional appropriations (hopefully under pay-as-you-go rules).
All of this helps explain why $1.7 billion was rescinded in FY 2016 from the Fund, with no ill effects.
Myth #4 The rescissions violate the agreement to reauthorize CHIP.
The Center for Children and Families at Georgetown University’s Health Policy Institute acknowledges that the rescission is unlikely to impact states’ CHIP programs “immediately” but claims that the rescission “violates the bipartisan CHIP agreement” when it was recently reauthorized.
As noted above, the rescission will have zero impact on the $21.5 billion in CHIP allotments for 2018, nor the $122.9 billion for the next five years.
Myth #5: The rescission breaks faith with the budget deal to boost the spending cap.
A writer at the Center for Budget and Policy Priorities (CBPP) argued that, instead of being rescinded, unused funding from past years should instead be diverted for other purposes in order to “keep faith with the new funding caps to which policymakers agreed in the budget deal.” The budget deal boosted spending caps by approximately $300 billion over the next two years.
This bizarre view treats the higher cap as something like a mandate that such an amount must be spent regardless of circumstances. This is not how budgets should work. Agencies should work with Congress to determine the appropriate amount of funding to complete objectives established in law, not set a desired overall spending level and then work to spend exactly that amount of money without regard to the objectives the funding serves.
Since most of these rescission cuts occur only in unspent funds, calling for these to be diverted rather than saved provides Congress the opportunity to continue to use budgetary gimmicks to increase spending while pretending they are being offset from somewhere else in the budget. This kind of gimmickry is dishonest and does a disservice to taxpayers.