What is Sequestration and Why Should You Care?

Jimmy Christiensen lobbyist for AGC of America reports that on Sept. 14 the Obama administration released a report to Congress providing a first guess at how they will implement $1.2 trillion in automatic budget cuts—called sequestration—slated to begin on Jan. 2 2013. This sequestration process comes as a result of the debt ceiling deal –enacted under the Budget Control Act of 2011.

According to the report if Congress and the president cannot reach a deal to avert sequestration after the election many direct federal construction accounts could see anywhere from a 7.6 to 9.4 percent cut from “budgetary resources” in FY 2013. These “budgetary resources” include new budget authority unobligated balances direct spending authority and obligation limitations. Simply stated available federal funds both from current and past fiscal years will likely be subject to across-the-board cuts with limited exceptions. According to the report the construction accounts seeing the greatest cuts include the Department of Defense military construction account ($1392 million—a 13 percent cut from FY 2012 funding levels) and major USACE civil works construction accounts ($546 million—a 12 percent cut from FY 2012).

Other construction accounts facing potential cuts include those within the National Resources Conservation Service ($19 million—a 63 percent cut from FY 2012) and the Bureau of Reclamation ($89 million—an 11 percent cut from FY 2012). The report also outlines cuts to Department of Transportation accounts impacting highway and transit funding. While the Highway Trust Fund is not included in sequestration general fund transfers into the trust fund resulting from the recently enacted MAP-21 would be cut by $471 million hastening the date when the trust fund will once again be unable to support annual funding levels. A portion of the transit funds (which are primarily capitol grant funds) are from general revenue and these could be cut by $156 million. As noted though the report provides an estimate as to sequestration’s possible impact on some construction accounts it does not provide information on other such accounts. In many cases the report merely articulates top line budget accounts and does not delve into how the subaccounts within are specifically impacted.

Additionally it is worth noting that sequestration takes effect in January 2013—three months into the 2013 fiscal year. As a result these cuts meant for the full 12 month FY 2013 will only be instituted over 9 months of FY 2013. These possible construction investment account cuts coupled with the six-month prohibition on new project starts in the recently passed continuing resolution funding the government through March 27 2013 add insult to injury to an industry that’s already suffered severe economic hardship for more than four years and a federal infrastructure and facility system with critical needs that continue to go unmet. For some construction accounts at least there is a bit of good news. All Department of Veterans Affairs accounts the General Services Administration’s Federal Buildings account and the Highway Trust Fund itself are exempt from sequestration and do not face budget cuts in the report. However these accounts could face cuts under BCA-enacted spending caps for FY 2014 through FY 2021. AGC continues to advocate on Capitol Hill for adequate investment in our nation’s federal infrastructure and facilities.