July | August 2017







Focus Turning to OMB Director and Trump Administration Budgets

By CSG Staff
States are on the front lines of policy implementation as the Trump administration assumes office and moves to fulfill the president’s campaign promises. Ranging from the direct financial impact of Medicaid and regulatory reform to the indirect challenges universities have with immigration reform, states may face increased fiscal pressures as new policies roll out.  
Medicaid is a particular concern of states. Federal funding covers 62 percent of the $532 billion states spent on Medicaid in fiscal 2015, according to a Centers for Medicare and Medicaid Services fact sheet published Feb. 4, 2016.
Governors of both political stripes have expressed their concerns over Medicaid cuts.
Ohio Gov. John Kasich and Lt. Gov. Mary Taylor wrote in a January 2017 letter to Republican congressional leaders to express concern about how their state will continue coverage for 700,000 Ohioans newly insured.
“Thirty-one states—more than half of them with Republican governors—extended Medicaid coverage,” the letter said. “Those that did are experiencing significant positive benefits.”
In Ohio, Medicaid expansion led to the lowest uninsured rate on record for low-income adults, decreased the number of expensive emergency room visits and provided better financial and health status for those who gained coverage, Kasich said.
Regulatory Reform
A central component to Trump’s agenda is reducing regulations through reform. His first step in achieving this goal was to sign an executive order on Jan. 30 that requires agencies to identify at least two prior regulations for elimination for every one new regulation issued. The order also directs agencies to prudently manage and control costs of new regulations through a budgeting process. 
“This week we also took significant action to roll back the massive regulation that is devastating our economy and crippling American companies and jobs,” Trump said in his weekly address. “That's why I have issued a new executive order to create a permanent structure of regulatory reduction. This order requires that for every one new regulation, two old regulations must—and I mean must—be eliminated. It’s out of control.”
Regulatory reform has been a hot topic in states for years and a high priority for many governors. In his 2017 State of the State address, Missouri Gov. Eric Greitens said he would take steps to curb burdensome regulation, starting with an executive order putting a freeze on all new regulations and rulemaking.
“Over the course of the last 17 years, Missouri has issued over 40,000 pages of new regulations,” Greitens said. “If you laid those pieces of paper end to end, that’s over 5 miles of new regulations. These regulations, and those that come down from Washington, cost people money.”
Greitens said that, while some rules are needed to protect the health and safety of residents, enforcing unnecessary and frivolous regulations takes time and resources away from “important things like safe water and safe travel.”
“I have ordered a complete review of every regulation in the state of Missouri. We’re going to reduce unnecessary and outdated regulations so that we can get back to creating good, quality, high-paying jobs,” said Greitens. “We need an effective government that serves the people and makes it easy to do business.”
According to the National Association of State Budget Officers, three of every 10 dollars spent by state governments in 2015 were received directly from the federal government. In addition to these direct transfers, indirect federal spending in the states includes salaries for 85 percent of the federal workforce that lives outside of the Washington, D.C., beltway, research grants to universities and nonprofits, grants to local sub-state governments, Social Security, other welfare programs and federal contracts to businesses and suppliers.
That means a lot is at stake when it comes to the official President’s Budget Request for fiscal 2018, which the administration is expected to release soon. The government is currently funded under a continuing resolution that expires on April 28, 2017, so the new administration will have to propose their own fiscal 2018 budget while also negotiating funding for the second half of fiscal 2017.
One of the most influential people in building the first Trump budget will be the director of the Office and Management and Budget, or OMB. Trump has nominated South Carolina Congressman Mick Mulvaney to head the agency. Mulvaney has been approved by the Senate Committee on Homeland Security and Governmental Affairs and is pending a vote by the full Senate.
As the future director of OMB, the congressman would hold significant sway over how the new administration approaches federal spending issues.
Mulvaney is known as one of the staunchest budget hawks in Congress.  He regularly voted against measures to increase the debt limit, as well as voting in support of repealing the Affordable Care Act.
During his confirmation hearing, Sen. Bernie Sanders pressed Mulvaney on previous comments that Social Security and Medicaid must undergo significant cuts and reforms, and he asked Mulvaney whether he would bring this perspective and advice to the new president.  In response, Mulvaney said he would advise the president truthfully and that, “If we do not reform these programs… I believe in nine or 10 years the Medicaid trust fund is empty and roughly 17 or 18 years, the Social Security trust fund is empty.”
As Mulvaney prepares to assume office and the administration and Congress work to finish the fiscal 2017 appropriations and begin work on the full fiscal 2018 appropriations bills, CSG staff will continue to monitor the president’s proposals, bills and amendments. With the fiscal 2017 federal budget deficit estimated to be around a half trillion dollars, states will have a significant stake in where and how the federal government proposes to reduce discretionary and mandatory expenditures.
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