PRESIDENT'S BUDGET REQUEST FOR FISCAL YEAR 2005

February 2, 2004

Holding non-defense, non-homeland security discretionary spending to less than one percent, as the president's $2.3 trillion-plus budget plan proposes for fiscal year 2005, will hardly make a dent in projected deficits. But it''s certain to force some tough choices when Congress wades into the details later this year.

Election years have never been very conducive to bipartisan cooperation; this year could be downright nasty. Perhaps seeing the handwriting on the wall, Senate appropriations committee chair, Senator Ted Stevens (R-AK) has already predicted that only two or three government spending bills will pass before the November elections-a disappointing but nonetheless pragmatic assessment of just how tough the year ahead will be.

Budget realities and political pressures

Two-thirds of the budget is comprised of entitlement programs and payments against the national debt-items over which lawmakers have little control. That leaves the remaining one-third, the so-called discretionary programs, to bear the brunt of any budget-cutting that's imposed this year. If Congress acquiesces to the president's steep increases for defense and homeland security and lesser increases for international HIV/AIDS funding and the NASA Mars mission, the remaining pot of discretionary funds will shrink even more.

Although the 4 percent fourth-quarter growth rate was encouraging, it marked a sharp slowdown from the 8.2 percent annual rate of the previous three months. And while indications are that the economy is getting stronger, unemployment remains a problem, leaving the nation with 2.3 million fewer jobs than when President Bush took office.

Budget hawks contend that economic growth alone will not stem the red ink. They point to a recent report from the Congressional Budget Office, projecting large deficits even while assuming a very strong economic recovery. According to CBO, a $2.38 trillion deficit is projected for the next 10 years, including a record $477 billion deficit for fiscal year 2004. CBO went on to caution that if tax cuts set to expire in 2010 are made permanent, with no offsetting revenues, that would cost an additional $2.2 trillion over 10 years, and have a "corrosive effect" on the economy.

Conservatives in Congress, in the meantime, have begun to sound the drum for deep cuts in government spending, noting that federal spending has grown twice as fast under President Bush than under his Democratic predecessor. Even when defense and homeland security are taken out of the equation, they say, other discretionary programs have grown 11 percent since 2001.

It is against that backdrop that the president's budget will be debated in Congress this year.

Budget overview: Department of Health and Human Services

The first step in that process came on February 2, when President Bush sent his $2.3 trillion blueprint to Congress. In it he includes $401.7 billion for defense, a 7 percent increase over this year, and an overall 3 percent boost for education that includes $1 billion more for special education and aid to low-income school districts. Other significant items in the budget include $2.7 billion to battle AIDS and other diseases in foreign countries, and $2.5 billion for countries that adopt democratic reforms.

The president's budget for the Department of Health and Human Services totals $580 billion, an increase of $32 billion, or 5.8 percent, over this year's funding level for the over-400 programs administered by HHS. The discretionary portion of the total, $67 billion, represents an increase of 1.2 percent.

The budget includes some new-and some re-configured-programs to reflect the president's priorities, including:

 

  • Calls for Congress to reform the Medicaid program by allowing states to take Medicaid and SCHIP funds in a flexible allotment that permits them to tailor the program as they see fit.
  • An investment of $373 million to accelerate the detection of and response to potential disease outbreaks and bioterrorism.
  • New investments totaling $150 million for the construction of twenty university-based bio-safety laboratories.
  • A total of $1.2 billion over five years for the TANF welfare reform program, to promote healthy marriage and family formation; another $161 million is allotted for faith-based and community initiatives.
  • Doubling, to $273 million, support for abstinence education programs.
  • Proposals to enhance automation and significantly increase child support collections.
  • New initiatives to improve childhood immunization rates, combat BSE, or Mad Cow Disease, and $73 million to implement the president's New Freedom initiative for the disabled.

    Following is a summary of other programs contained in the HHS budget proposal.

     

    • Health Resources and Services Administration: The president's budget requests $6.6 billion for HRSA, including $1.8 billion for community health centers serving 15 million low-income patients, many of whom are uninsured. Nearly 7 million of these individuals reside in rural communities. A portion of the funds requested support medical malpractice coverage for center employees as well as volunteer providers in free clinics throughout the country. The HRSA budget also includes $147 million, an increase of $5 million, to help shrink the current nursing shortage in this country, now estimated at 168,000. The funds support basic nurse education and retention programs as well as loan repayments and scholarships. Not surprisingly, however, the president's budget calls for the elimination of $283 million for other health professions training programs.

      The budget includes $730 million for the Maternal and Child Health block grant, which supports direct care, health promotion activities and home visiting and nutrition counseling to 27 million women and children. However, the budget proposes to eliminate the newborn hearing screening program, arguing that this service can be provided through the MCH block grant.

      The president's budget requests $303 million to continue support for the children's hospitals graduate medical education program, and $25 million to maintain support for the organ transplantation program.

    • Indian Health Service: The budget contains $3.7 billion, a net increase of $45 million, to serve 1.6 million American Indians and Alaska Natives through contract health programs and outpatient clinics. The IHS program also supports urban Indian health, sanitation construction on reservations, and a series of preventive health initiatives related to obesity, diabetes prevention and disease management.
    • Centers for Disease Control and Prevention: The president's budget requests $6.9 billion for CDC, a net decrease of $58 million below this year's funding. The total includes $1.9 billion for mandatory childhood immunization activities, and support for the National Breast and Cervical Cancer Early Detection program ($220 million) and a diabetes/obesity initiative ($566 million). Another $1.1 billion is allocated to continue bioterrorism preparedness activities, including a new interagency biosurveillance initiative that includes the FDA, Department of Agriculture and the Department of Homeland Security.

      The budget also includes $113 million to identify the cause of birth defects and developmental disabilities in children, and promote health and well-being among individuals in all age groups. Special focus will be on fetal alcohol syndrome, autism, attention-deficit disorder and Duchenne and Becker muscular dystrophy.

    • National Institutes of Health: The president's budget requests $28.8 billion for NIH, an increase of $764 million, or 2.7 percent over current funding. According to the budget document this amount will support nearly 40,000 research project grants, including an estimated 10,400 new and competing awards, an increase of 258 over this year's level. To help pay for these awards, biomedical inflation increases for continuation grants will be held to 1.3 percent, rather than the actual biomedical inflation rate of 3.3 percent. Intramural research will continue to comprise about 11 percent of NIH's budget.

      In outlining the top NIH research priorities, the budget document states that the funds requested "will allow NIH to address imperative requirements in biodefense; implement the NIH Roadmap for Medical Research; pursue an obesity research initiative; and manage a research initiative on developing nuclear and radiological threat countermeasures. Additional support will be provided to continue progress in promising arenas of science related to specific diseases such as cancer, HIV/AIDS, diabetes, Parkinson's disease, and Alzheimer's disease; while also pursuing whole new avenues of post-genomics research."

      As has been the case since September 11, a substantial portion of the NIH budget, $1.7 billion, is diverted for biodefense research as well as HIV-AIDS-related research ($2.9 billion). Of this amount, $100 million will constitute NIH's contribution to the Global Fund to Fight AIDS/HIV, tuberculosis and malaria.

      The president's budget requests $150 million for construction of 20 specialized biosafety laboratories at universities and research institutions. These facilities will also back up state and federal facilities in the event of an emergency.

      In an effort to target major research opportunities that transcend a single institute, the budget allocates $237 million for the "Roadmap" initiative, an increase of $109 million over current funding organized into three core themes: new pathways to discovery; research teams of the future; and re-engineering the clinical research enterprise.

       

      • Substance Abuse and Mental Health Services Administration: The budget proposes $3.6 billion for SAMSHA, a net increase of $199 million or 6 percent over current funding. In support of the president's goal to reduce illicit drug use, the budget proposes to double the Access to Recovery state voucher program, while seeking a 6 percent increase for clinical treatment and recovery support activities. The budget also includes $196 million to implement a new strategic prevention initiative that, among other things, promotes the use of performance measures and evaluation tools by providers.

        The budget also proposes $44 million for new grants to help reduce system fragmentation, and increase services available to mentally ill individuals. States will be encouraged to develop comprehensive plans linking multiple service systems and agencies, including criminal justice, housing, child welfare and education.

      • Agency for Healthcare Research and Quality: The request for AHRQ totals $304 million, the same as fiscal year 2004, with priority assigned to improving patient safety and reducing medical errors. A total of $246 million would be devoted to research on cost-effectiveness and quality of health care, including $84 million for patient safety-related research. Of the $84 million, $50 million is allocated for health system-based information technology, with a special emphasis on small community and rural hospitals and systems. Of the remainder, another $24 million will support a collaboration with CDC, FDA and the Centers for Medicare and Medicaid Services, to develop a common web-based interface for medical providers.
      • Centers for Medicare and Medicaid Services: The $482.1 billion CMS budget supports Medicare, Medicaid, the State Children's Health Insurance Program (SCHIP) and operating expenses. This represents a $29.1 billion increase over this year's funding. Much of CMS-s efforts this year will be devoted to implementing the recently enacted Medicare Prescription Drug, Improvement and Modernization Act. The first phase of the prescription drug reform, enrollment in a discount drug card program, begins in June 2004.

        As in the past, the president's budget request includes two user fee proposals. The first allows CMS to assess a fee for each un-processable or duplicate form submitted by physicians. The budget states that these incidents are a drain on a system that must process over a billion claims per year. The second assesses a $50 fee for physicians who wish to elevate a fee-for-service appeal to the adjudication level. CMS expects 200,000 appeals to be filed. These fees would generate $195 million and $10 million, respectively.

      • Administration of Children and Families: The ACF budget request totals $46.6 billion, a net decrease of $2.4 billion or 5 percent below current funding. Of this total $13.9 billion supports discretionary programs. The single largest component of ACF, the Head Start program, would be allocated $6.9 billion, an increase of $169 million, to serve 919,000 children, including 62,000 children in Early Head Start. A small portion of the funds, $45 million, will be used to launch nine state pilot projects to coordinate preschool programs, federal child care grants and Head Start under a comprehensive early childhood program.

        A total of $393 million would be allocated to a Marriage and Health Family Development initiative that includes abstinence education and promoting responsible fatherhood/health marriage programs.

        ACF also plans to launch new initiatives aimed at increasing child support enforcement, including proposals to enhance automation.

      • Administration on Aging: The administration's budget request for AoA totals $1.38 billion, or about the same as the current funding level. This includes $162 million for the National Family Caregiver Support program; $357 million for home and community-based support services; $719 million for nutrition services; and $12 million to improve the quality of services provided to those individuals suffering from Alzheimer's Disease.

      Budget overview: Department of Education

      For fiscal year 2005, the president's budget requests $57.3 billion for the Department of Education, an increase of $1.7 billion or 3 percent over this year's funding level. If adopted, this would represent a 61 percent increase in discretionary funds from the fiscal year 2000 level. Following is a summary of significant items in the president's budget.

       

      • Title I grants to local education agencies: The budget includes $13.3 billion for Title I grants to aid educationally disadvantaged children, an increase of $1 billon, or 8 percent, over current funding. The increase, along with $1.2 billion shifted from the Educated Finance Incentive Grants formula, would be targeted on high-poverty school districts and schools facing the greatest challenge in helping students meet academic standards.
      • Improving teacher quality: The budget proposes $2.93 billion to allow states the flexibility to select and implement research-based strategies that best meet their particular needs for developing a high-quality teaching forces and improving student achievement. In return for this flexibility, school districts are required to demonstrate annual progress toward ensuring that teachers teaching core academic subjects are highly qualified.
      • Reading First: The president's budget includes $1.26 billion, an increase of 12.4 percent, to expand support for comprehensive reading instruction.
      • Safe and Drug-free Schools: For fiscal year 2005, the president's budget proposes $716 million, an increase of $41.8 million or 18 percent, including $100 million to more than double the number of at-risk youth served through school-based mentoring programs. Other high priority programs include $90 million for comprehensive, community-wide Safe Schools/Healthy Students drug and violence projects that include mental health preventive and treatment services, and $25 million for school-based drug testing programs for students.
      • Other elementary and secondary education programs: In addition to expanding the traditional state and local educational grant programs, the president's budget also seeks continuation of a number of categorical programs, including Reading Is Fundamental ($25.2 million) and Ready-to-Learn Television ($22.9 million).
      • Special Education: The budget includes $12.2 billion for Special Education programs, of which $11.1 billion is for grants to states, an increase of $1 billion over current funding. If adopted by Congress this would provide an estimated average of $1,612 per student for about 6.9 million children ages 3 - 21.
      • Vocational and Adult Education: The president proposes $1.6 billion, a cut of $499 million or 38 percent from the current funding level. Much of the decrease results from the administration's proposal to replace the current state formula grant program with a new Secondary and Technical education program that would rely more heavily on community colleges and schools to provide vocational and adult basic education. Funding for tribally-controlled institutions would be shifted to the Higher Education program.
      • Student financial aid: Student aid funding would grow to $73.1 billion, an increase of $4.4 billion or 6 percent over current levels. Under this proposal, the number of students assisted would grow by 426,000, to 10 million. The total includes $12.9 billion to fully fund Pell grants to 5.3 million students; $998.5 million for work-study; $66.7 million for Perkins loans; and $7.0 billion for federal family education loans.
      • Higher education: The president's budget request includes $2 billion, a reduction of $116 million or 5.5 percent below current funding. The total includes $240.5 million to aid historically Black institutions, $95.9 million for Hispanic-serving institutions, $23.7 million for tribally controlled colleges and universities, and $7.2 million for tribally controlled vocational and technical institutions.
      • Programs proposed for elimination: In order to offset some of the increases outlined above, the president's budget proposes to eliminate 38 programs, totaling more than $1.4 billion in savings, including Ready to Teach, Even Start, regional education laboratories and tech-prep grants to states.


APPENDIX


NIH OVERVIEW BY INSTITUTE
(Dollars in Millions)
Institutes/Centers
2003 2004 2005 Increase % Increase
Cancer Institute 4,584 4736 4,870 134 2.83%
Heart, Lung and Blood Institute 2,792 2878 2,964 86 2.99%
Dental & Cranofacial Research 371 383 394 11 2.87%
Diabetes & Digestive & Kidney Disease 1,721 1821 1,876 55 3.02%
Neurological Disorders and Stroke 1,455 1501 1,546 45 3.00%
Allergy and Infectious Diseases 3,703 4303 4,426 123 2.86%
General Medical Sciences 1,847 1905 1,960 55 2.89%
Child Health & Human Development 1,204 1242 1,281 39 3.14%
Eye Institute 632 653 672 19 2.91%
Environmental Health Sciences 696 709 730 21 2.96%
Aging 993 1025 1,056 31 3.02%
Arthritis & Muscul. & Skin Disease 486 501 515 14 2.79%
Deafness&Other Communication Disorders 370 382 394 12 3.14%
Mental Health 1,339 1382 1,421 39 2.82%
Drug Abuse 961 991 1,019 28 2.83%
Alcohol Abuse & Alcoholism 416 429 442 13 3.03%
Nursing Research 130 135 139 4 2.96%
Human Genome Research Institute 464 479 493 14 2.92%
Biomedical Imaging & Bioengineering 280 289 298 9 3.11%
Center for Research Resources 1,139 1179 1,094 -85 -7.21%
Complementary & Alternative Medicine 113 117 121 4 3.42%
Minority Health & Health Disparities 186 192 197 5 2.60%
John E. Fogarty International Center 62 65 67 2 3.08%
Library of Medicine 306 317 325 8 2.52%
Office of the Director 286 327 360 33 10.09%
Building & Facilities 639 99 100 1 1.01%
Nuclear/Radiological Countermeasures Research 0 0 47 47
ONDCP Drug Forfeiture Fund Transfer (NIDA) 4 5 0 -5
Total, Program Level 27,179 28,045 28,807 764