Governor Martin O’Malley’s Federal Relations Director, Dana Thompson, briefed county elected officials on the status of the congressional “budget supercommittee” that was formed as part of the federal debt ceiling law, the Budget Control Act of 2011, and its potential impact on Maryland at the 2011 MACo Summer Conference on August 19.

The Joint Select Committee on Deficit Reduction is a 12-member “supercommittee” (6 House and 6 Senate with 3 Democrats and 3 Republicans from each house) that was created as part of the federal government’s compromise on the agreement to raise the federal debt ceiling under the recently passed Budget Control Act.  The supercommittee is charged with recommending $1.5 trillion in cuts by late November, which would have to be voted on by December 23.  If the supercommittee fails to make recommendations, $1.2 trillion in automatic cuts will occur by way of a “sequester.”  The cuts reduce the projected increases in federal spending and do not represent a reduction in baseline spending.  As previously reported on Conduit Street, Maryland Representative Chris Van Hollen has been selected to serve on the supercommittee.

Mr. Thompson explained that the because of its proximity to Washington DC and its many federal facilities, including military installations, Maryland is heavily reliant on the federal government and both the State and local governments will be challenged by any federal cuts.  He stated that the Budget Control Act calls for substantial cuts over 10 years through 2021.  The initial deep cuts start in FY 2012 and FY 2013 and will total nearly $1 trillion over the 10 year period.  For the initial cuts, “security” programs, which include homeland security and defense, and “non-security” programs are protected by a “firewall” that will limit the amount of cuts to those areas.  Mr. Thompson stated that during the initial cuts, discretionary non-defense programs are those primarily at risk, and programs will be in jeopardy of being terminated.

In addition to the initial cuts required under the Act, the supercommittee must recommend at least an additional $1.2 trillion in deficit reduction measures.  Mr. Thompson stressed that “nothing is off-limits” for the supercommittee, including such areas as Medicare, Medicaid, social security and foreign aid.  US House and Senate committees must submit their recommendations to the supercommittee by October 14.  The supercommittee must then vote on a plan/proposal by November 23 and report out a bill by December 2.

Each House and Senate committee will receive a portion of the supercommittee’s bill and must report out its portion of the bill without amendments by December 9.  The House and the Senate must then vote on the supercommittee’s bill by December 23.  Mr. Thompson stressed that the vote must be a straight “up or down” vote on the bill and that amendments are not allowed.  The House and Senate must also separately consider a constitutional amendment requiring a balanced budget.

If the supercommmittee fails to reach an agreement, an automatic sequester takes effect.  If the sequester occurs, Medicaid, Medicare, and social security are removed from consideration and remaining programs will be reduced by a total of $1.2 trillion dollars in “across the board” cuts  by January 2013 (including 50% in cuts to defense equaling $55 billion per year over 10 years and 50% in cuts to domestic programs totaling $55 billion per year over 10 years).  Mr. Thompson noted that based on current estimates, Maryland stands to lose a considerable amount under either the supercommittee or the sequester scenario than if an agreement is reached.

He stated that both the State and local governments need to prioritize their objectives, especially as they relate to job creation and growth.  “Local governments need to identify their critical programs and articulate that,” he urged, “You need to identify your essential programs and let our [congressional representatives and senators] know their importance so they can be protected.”  He stressed the need for early involvement in the process.

Mr. Thompson also stressed his availability to answer questions from the counties.  “I want to be here to be a real resource to you,” he stated.  Mr Thompson can be reached via phone at 202.624-.1430 or by email at dthompson@gov.state.md.us.