Federal Budget Reconciliation Bill

[Colleen Pate]

Council Members:

I have been following the massive budget reconciliation bill and have been meaning to share my thoughts in a very general sense. As you likely know, the U.S. House of Representatives passed a bill by the slimmest of margins, 215-214. I called it “massive” and that may be the wrong word—it was only 1,116 pages!!

The media have focused on how the measure would increase the national debt by $4 trillion or more while cutting two core safety net programs, mostly to provide tax relief to the wealthy and corporations. You likely share my concerns about those provisions of the bill. However, I want to focus on what the bill might mean for cities in general, and Austin in particular.

A couple of positive things:

MUNI BONDS/PRIVATE ACTIVITY BONDS

The United States Conference of Mayors, the National League of Cities, other local government organizations, and a lot of individual cities and local elected officials, worked very hard so that the bill will NOT make any changes to the tax exemption for municipal bonds, including private activity bonds. As you know, I’ve been talking about this since the new Administration came in. The private activity bonds are especially important for things like our airport expansion and for the development of affordable housing.

While that’s good news, we’re not done yet. I still worry about the tax exemption for muni bonds being used to offset the cost of the bill’s tax provisions as the bill moves forward.

AFFORDABLE HOUSING

On the topic of affordable housing, the bill would increase the volume cap for the Low-Income Housing Tax Credit for four years (2026-2029) and make other enhancements to LIHTC. That will help. It’s also good to see that there is bipartisan support in Congress for LIHTC and for addressing our housing challenges.

That’s it for good news. The other news:

MEDICAID & SNAP

No matter how its authors try to frame it, the bill will reduce enrollment in Medicaid and SNAP. Simply put, we are not going to find over $1 trillion in savings from Medicaid and SNAP by eliminating “fraud, waste, and abuse.” It’s not even close. Texas already makes it hard for people who qualify for these benefits to enroll, and enactment of this legislation will make it even harder.

I think these cuts will also put pressure on public hospitals and our local food banks.

On health care, the bill would NOT extend enhanced Affordable Care Act enhanced tax credits that are set to expire at the end of this year, meaning many people and small businesses will face higher health insurance costs next year.

DIRECT NEGATIVE IMPACTS ON AUSTIN

You already know that we’ve been told to not expect the $104 million awarded to Austin for I-35 Cap & Stitch. The bill would rescind $4 billion in unobligated funds from the Neighborhood Access & Equity Grant Program. That’s where and how we lose the money.

The reconciliation measure would also eliminate most of the clean energy tax credits created by the Inflation Reduction Act, which Austin was planning to claim to help pay for some of our clean energy investments.

NEXT STEPS

The bill has a long way to go. Leadership has the goal of passing the final bill before August. That’s going to be very hard. It will face lots of challenges in the Senate.

For Austin, it creates potential challenges. While it could lead to smaller cuts to Medicaid, SNAP, and clean energy tax credits, it could bring cuts in other programs we care about or limits on or the repeal of the tax exemption for municipal bonds if bill writers try to offset those smaller cuts.

At the same time Congress is looking to finalize this reconciliation bill, it will start working on the 12 annual appropriations bills that make up the discretionary portion of the federal budget. The President has proposed cutting or eliminating dozens of programs of interest to cities, including eliminating core programs such as CDBG, HOME, LIHEAP, and CSBG, and making deep cuts to Section 8. There will be a lot to watch.

Thanks,

Kirk
On Behalf of Mayor Watson