United States: The Budget Outlook For Maritime Programs For FY2014

Last Updated: June 18 2013
Article by Joan M. Bondareff

We are halfway through Fiscal Year 2013 ("FY2013") and some of the budget details and spending plans for federal maritime agencies are still unresolved. In the meantime, the President has submitted his budget request for FY2014 and Congress is debating its outcome. Sequester cuts and fights over whether the sequester should continue into 2014 are continuing. The outlook for a grand bargain over the budget between the President and Congress does not look positive at the time of this writing. This article describes what budgets the agencies do have to spend for the rest of FY2013 and what the outlook looks like for FY2014.

Discussion

The fight over the FY2013 budget was quite intense, but on March 26, 2013, the President signed into law the most recent Continuing Resolution ("CR"), keeping the government open and running for FY2013 or through September 30, 2013 (Pub. L. 113-6). Some of the agencies were fortunate to have specific appropriation bills passed and included in the CR. This gave greater flexibility and spending authority to these agencies, and included, for purposes of this article, the Department of Homeland Security ("DHS"), which houses the Coast Guard, Federal Emergency Management Agency ("FEMA"), and Customs and Border Protection ("CBP"), and the Department of Commerce, which houses the National Oceanic and Atmospheric Administration ("NOAA"). The Department of Transportation was not given any flexibility in its 2013 spending, leading to the Federal Aviation Administration ("FAA") debacle, discussed below.

2013 FUNDING FOR MARITIME PROGRAMS

Programs funded for the rest of 2013 of interest to the maritime community include:

  • $10.4 billion for the Coast Guard—an increase of $79 million over 2012 funding—allowing the Coast Guard to continue its ship and airplane replacement program;
  • $2.5 billion for FEMA's State and Local and First Responder Grants, including approximately $92 million for port security grants—to be announced shortly;
  • $10.4 billion for CBP—an increase of $215 million over 2012 funding levels;
  • $352 million for the Maritime Administration, including $9 million for the popular Small Shipyard Grant Program (applications were due on May 28, 2013);
  • $5 billion for NOAA, which is $111 million over the FY2012 level, and includes full funding for weather satellites and critical weather predictions;
  • $474 million for the also-popular TIGER grant program managed by the Department of Transportation, which allows ports to apply for grants for intermodal, infrastructure construction projects (applications were due on June 3, 2013); and
  • $9 million in EPA's Clean Diesel or DERA grants program, allowing ship owners to replace/upgrade marine and port operators to upgrade equipment affecting air emissions (applications are due on June 25, 2013).

Some spending plans have to be approved by Congressional appropriators before agencies can begin to spend even appropriated 2013 funds. This is the case with NOAA, which at press time was still waiting for the House to approve its spend plan.

Since the White House and Congress could not reach an agreement to offset the sequester or across-the-board cuts from the Budget Control Act of 2011, these sequester cuts (of between 5 and 10%) did occur and have to be taken from all agency budgets, including defense and nondefense agencies.

Notably, the President's budget request for FY2014 does not include the sequester cuts as a starting point. As crises occur, as it did with the FAA furloughs of air traffic controllers, Congress will act to resolve the crisis on a case-by-case basis, as it did by quickly passing remedial legislation, the Reducing Flight Delays Act of 2013, signed into law on May 1, 2013 (Pub. L. 113-9). Whether this becomes a precedent for other sequester crises (if they occur) remains to be seen.

FY2014 BUDGET REQUEST AND CHALLENGES

The President's budget request for FY2014, usually delivered in February of the year prior to the beginning of a fiscal year, was delivered late this year. The President's budget arrived in Congress in the midst of two very different views of the budget passed by the House of Representatives and the Senate in the form of budget resolutions. These resolutions, while non-binding, provide guidance to their respective appropriation committees. The House passed its budget resolution on March 14, 2013. The House resolution calls for cuts in high-speed and intercity rail projects and would balance the budget in approximately ten years. The Senate Budget Resolution, passed on March 23, 2013, includes $100 billion for infrastructure and job creation and is much closer to the President's vision for the budget.

Prior to the release of his budget request, in the State of the Union Address on February 12, 2013, President Obama proposed a "Fix-It-First Program to put people to work as soon as possible on our most urgent [infrastructure] repairs, like the nearly 70,000 structurally deficient bridges across the country." He also proposed a Partnership to Rebuild America to attract private capital to upgrade infrastructure, including "modern ports to move our goods."

The President amplified on these remarks in his FY2014 request for the Department of Transportation, which contains a new request for $50 billion to provide immediate transportation investments in key areas, including ports, to spur job growth and enhance our nation's infrastructure. Of this amount, $4 billion is to be allocated to a TIGER like grant program for infrastructure construction grants.

For the Maritime Administration ("MARAD"), the President has requested a total of $365 million in budget authority, or 3.8% over the enacted 2013 level. The MARAD budget includes $208 million for the Maritime Security Program; $81 million for the U.S. Merchant Marine Academy; $25 million "for a new initiative aimed at mitigating the impact on sealift capacity and mariner jobs resulting from food aid program reform" (caused by last year's sudden cut to the cargo preference requirements for food aid shipments on U.S. flag ships from 75 to 50%); $2 million for a new Port Infrastructure Development Program; and $2.7 million for administrative costs of managing the Title XI loan guarantee program. The President's budget continues to zero out funding for new loan guarantees. In the meantime, Congress is considering legislation to restore the cargo preference cuts. (See H.R. 1678: Saving Essential American Sailors Act, introduced by Congressmen Elijah Cummings (D-MD) and Scott Rigell (R-VA).)

For the Coast Guard, the President has requested a total of $9.79 billion, or 5.6% less than the FY2013 enacted level. This request includes $743 million for the continued purchase of surface assets, including funding for the seventh National Security Cutter, procurement of two Fast Response Cutters, and pre-acquisition activities for a new Coast Guard polar icebreaker for Arctic and Antarctic missions, expected to replace the POLAR STAR at the end of its life (projected to be 2022).

Also funded under the DHS budget are FEMA and CBP. These agencies would receive $13.45 billion and $12.9 billion, respectively. As part of the FEMA budget, the President has proposed $2.1 billion for a new consolidated National Preparedness Grant Program, which merges all state and local and port security grants into one discretionary pot. Last year, Congress did not agree to this request for consolidating the grants into one block grant. We expect the CBP budget for border security will remain steady or increase if comprehensive immigration reform legislation is passed this year.

For NOAA, the President has requested a total of $5.4 billion, an increase of $541 million over the 2012 spending plan. The budget includes $929 million for the National Marine Fisheries Service; $529 million for the National Ocean Service, of which the Marine Debris Program has increased by $1 million (total $6 million), and the Regional Ocean Partnership Grants, which have been increased by $1.5 million; a total of $2.186 million for the National Environmental Satellite, Data and Information Service, including $954 million for two new GOES weather satellites; and an increase of $21 million to support an additional 1,627 days-at-sea for NOAA's oceanographic research fleet.

Summary

The House and Senate are currently holding a series of hearings featuring Administration witnesses to delve into the President's budget requests. The House of Representatives is likely to pass appropriation bills that are vastly different from the White House's request. In fact, Members of the House Appropriations Committee, such as Congressman Frank Wolf (R-VA), Chair of the Commerce, Justice, Science Appropriation Subcommittee, have already questioned whether full funding can be provided for the Commerce/NOAA budgets. It also remains to be seen whether Congress can revert to regular order, i.e., by passing the individual appropriation bills to keep the government operational in 2014, or whether another CR will be adopted. Senate Appropriations Committee Chair Barbara Mikulski (D-MD) has a desire to return to regular order, but this is not likely to happen in the near term except for defense agencies where bipartisan agreement is more likely to be reached.

The government keeps limping along with cuts from sequester, delays in Congressional approval for spending plans, and uncertainties in the outcome for 2014. These challenges will also have a significant effect on their constituents as contracts and grants are delayed. The House and Senate will once again have to debate their respective visions for the 2014 budget and come to some agreement on funding levels for 2014. In the meantime, Congress will have to raise the debt ceiling once again and decide whether to do so without a fight over offsetting budget cuts. Given the current revenue situation, a fight over the debt ceiling is expected to be postponed to the fall.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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