Special Analysis 11-05
November 22, 2011

On August 2, 2011, the president signed the Budget Control Act of 2011 (BCA, P.L. 112-25), which provides for an increase in the federal debt limit and includes several provisions aimed at reducing long-term budget deficits (see Budget Brief 11-13 for more details). One of these provisions created a Joint Select Committee on Deficit Reduction (JSC) to develop recommendations for reducing the federal budget deficit by at least $1.2 trillion over 10 years. The legislation resulting from these recommendations would be considered by Congress under special, expedited procedures, designed to prevent amendment and limit debate. If the efforts of the JSC fail to achieve at least $1.2 trillion in deficit reduction and are not enacted by January 15, 2012, then an automatic process to reduce spending is triggered. This process, known as sequestration, would take effect on January 2, 2013, for fiscal year (FY) 2013 spending, and result in across-the-board (ATB) cuts to nonexempt discretionary and mandatory spending.

With the apparent failure of the JSC to produce a deficit-reduction proposal, the prospect of sequestration has moved closer to reality. This Special Analysis calculates the hypothetical impact of sequestration on funding for major discretionary grant programs of importance to states in FY 2013.