A two-year budget compromise was approved by the Senate on December 19, 2013 and is now sitting on President Obama’s desk for final signature. The bill will eliminate $45 billion from the next round of sequester cuts scheduled for January 2014. The deal would also eliminate the $18 billion in cuts set for 2015. Without the passage of the bill by the Senate, the federal government would again run out of funding on January 15, 2014, which would put even more forced spending cuts, known as sequester, back into play. The 16-day shutdown took ‘at least $24 billion out of the U.S. ecomony,’ according to Standard & Poor’s.
Spearheaded by Rep. Paul Ryan (R., Wis.) and Sen. Patty Murray (D., Wash.), the Ryan-Murray deal raises spending limits by $62 billion and achieves a net savings of approximately $23 billion over ten years. According to a report in Bloomberg, the agreement also sets spending at about $1.01 trillion for the fiscal year beginning October 1. The House approved the agreement on December 12, 2013 and a final vote by the Senate is set to happen this week.
What’s included in the Ryan-Murray deal?
· Hikes in ‘fees’ to the tune of $85 billion to further reduce the deficit. Some of the affected fees include those charged to airline passengers which cover the costs of aviation security bumping the cost from 30 percent to 43 percent of the cost covered by these ‘fees.’
· Requirement that federal workers and military personnel contribute more to their pension program to offset a reduction in contributions by the federal government. This provision only impacts those federal employees hired after December 31, 2013.
· Additional 1% cut to cost-of-living increases for retirement benefits for retired military service members who aren’t disabled and are not yet 62 years old, saving approximately $6 billion over ten years.
· Cancels planned cuts to doctors’ Medicare reimbursement rates.
· Restoration of billions back into the Military and Pentagon budgets.
· Reforms including a measure that all states would be required to use a Treasury program to crack down on fraud and over-payments in jobless benefits,” says David Rogers at Politico. Additionally, the new budget restricts access to the government’s Death Master File and enables government agencies to cross-reference requests for coverage against the list as a way to reduce fraud.
· Caps what the government will compensate contractors for the top salaries of their executives.
· A joint agreement that the U.S. and Mexico can drill jointly for oil in the Gulf of Mexico.
What isn’t included?
· Agreement on long-term survival of Medicare, Medicaid and Social Security
· Additional long-term unemployment insurance, scheduled to expire on December 28, 2013 which would assist some 1.3 million unemployed workers.
· Any conversation or agreement regarding the debt ceiling
Even with these changes to the budget, nearly 92 percent of the 2013 budget sequestration remains intact. How will the budget deal potentially impact your small business? Odds are your business is still working through the first round of sequestration from last spring and a review of your budgets and future projections should be adjusted accordingly. A PASBA small business advisor can help review your cash flow, budgets and projections to help keep your business on track especially when life’s little bumps become governmental pot holes.
PASBA member accountants bring the collective resources of a nationwide network of Certified Public Accountants, Public Accountants, Enrolled Agents and other practitioners available to answer your tax and financial questions and streamline your business accounting, bookkeeping, and payroll operations.
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