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Last Updated: 5/20/2013
Budget Issue: Recommend modifying proposed budget language on sequestration
Program: Federal Sequestration
Finding or Recommendation: Recommend modified version of proposed budget bill language for cuts pursuant to federal sequestration.
Further Detail


Across-the-Board Cuts to Occur Under Federal Sequestration. The federal Budget Control Act of 2011 put in place a “sequestration” process that took effect on March 1, 2013. Sequestration will impose on many programs an across-the-board spending cut. Sequestration, however, will not directly affect most of the federal funding streams that flow through the state treasury.


Administration Proposes New Control Section. For those state programs that are affected by sequestration, the administration has proposed a new control section in the budget bill that would provide the Director of Finance broad authority to reduce items of appropriation and associated positions consistent with sequestration and other related federal reductions.

LAO Comments

Budget Already Has Control Sections For Reductions in Federal Funds.  Control Section 8.50 of the budget requires the Director of Finance to notify the Legislature when block grant programs are reduced by more than 5 percent, including a plan for reducing expenditures for each program affected by the reduction. In addition, Control Section 28.00 authorizes the Director of Finance to reduce spending when federal funds are expected to be less than assumed in the budget. These control sections have worked well for adjustments in federal funding in the past and could be suitable for reductions under sequestration.

Recommend Modified Version of Existing Control Section. We recommend that reductions pursuant to sequestration be submitted through a new control section that is modeled on the existing language of Control Section 28.00. In addition, we recommend that the new control section provide the Legislature an opportunity to specify how reductions to items of appropriations will be made and require the Director of Finance to conform to those provisions.

Our proposed alternate control section follows:

SEC. 8.56.

(a) It is the intent of the Legislature in enacting this section to provide administrative authority to reduce items of appropriation to conform with reductions in federal funds pursuant to federal government sequestration. However, this section does not provide an alternative budget process, and proposals for reduced spending authority ordinarily should be considered in the annual State Budget or other state legislation. Reductions for items pursuant to federal actions unrelated to federal government sequestration should be submitted through Sections 8.50 or 28.00.

(b) The Director of Finance may authorize the reduction of the amounts available for expenditure for any programs, projects, or functions in the schedule of any appropriation in this act equal to the amount of a corresponding reduction in federal funds pursuant to federal government sequestration. 

(c) In cases where the Legislature has, in this act or bills providing for appropriations related to this act, specified how the director is to implement reductions to specific programs, projects, or functions pursuant to federal government sequestration, the director shall conform to such provisions when making the reductions authorized by this section.

(d) Any reduction made under this section may be authorized not sooner than 30 days after the director provides notification in writing of the necessity therefor to the chairpersons of the committees in each house of the Legislature that consider appropriations, the chairpersons of the committees and the appropriate subcommittees in each house of the Legislature that consider the State Budget, and the Chairperson of the Joint Legislative Budget Committee, or not sooner than whatever lesser time the chairperson of the joint committee, or his or her designee, may in each instance determine. The notification shall include the amount of the proposed appropriation reduction, the program affected, the number of positions affected, and a description of the assumptions used in making the adjustment. The notification shall describe whether other options were or are available to prevent the reduction of appropriations referenced in this section, including, but not limited to, use of other available appropriations that otherwise would be unspent. Notification under the authority of this Section shall be in lieu of Sections 8.50 and 28.00.

(e) Any authorization made pursuant to this section shall remain in effect for the period the director may determine in each instance, but in no event after June 30, 2014.